MATEC Web Conf.
Volume 139, 20172017 3rd International Conference on Mechanical, Electronic and Information Technology Engineering (ICMITE 2017)
|Number of page(s)||5|
|Published online||05 December 2017|
An application of shortest path algorithm: optimal assortments for network goods with vertical differentiation
School of Management, Fudan University, Shanghai 200433, China
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This paper presents an efficient algorithm based on the shortest path algorithm for a directed weighted graph where all arc cots depend on which node is thought of as the source node. This approach can be applied well to the optimal assortment problem for a network good industry with vertical differentiation. The assortment problem was introduced for decision-makers to select what products to be produced or stocked from a large product category when it is not desirable to stock all of them. A network good is a good with network effect—the effect that the consumption of a good by one has an impact on the value of that product to others. Vertical differentiation occurs when the several goods can be ordered according to their objective quality in the sense that a high-quality good is “better” than the low-quality one. It is shown that an optimal assortment plan can be identified in a polynomial time by our algorithms. The theoretical results also provide qualitative managerial insights into the optimal assortment plan for decision-makers.
© The Authors, published by EDP Sciences, 2017
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (http://creativecommons.org/licenses/by/4.0/).
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