System and method to determine the prices and order quantities that maximize a retailer's total profit

Abstract

The present invention provides a system and method for determining the prices and order quantities that maximize a retailer's expected profit by using a multi-dimensional distribution of the highest prices that customers are willing to pay. This is novel, as well in the literature as in the patent database. Brand switching is dealt with, taking into account that consumers who come into the store with a-priori preferences for products build a-posteriori preferences at the point of purchase based on actual retail prices and availabilities in the store.

1 - 5 . (canceled) 
     
     
         6 . A system for determining prices and order quantities that maximize a retailer's total profit for a specific product category comprising:
 a computer to determine demand for products based on a distribution of upper limits of prices each customer is willing to pay for each of a plurality of products and based on given proposed retail prices;   a computer to determine an amount of products to be ordered by calculating profit based on one or more of
 available wholesale price data, 
 proposed retail prices, and 
 said determined demand at said proposed retail prices; 
   a computer to determine retail prices based on
 available wholesale prices, 
 a distribution of upper limits of prices each customer is willing to pay for each of a plurality of products, and 
 said determined demand for given products and said determined order quantities, both depending on retail prices; and 
   a computer to provide the resulting list of quantities and prices as one or more of
 a printout, 
 a machine-readable data output to storage, and 
 directly as input to data processing. 
   
     
     
         7 . The system of  claim 6 , wherein the computer is connected to a network. 
     
     
         8 . The system of  claim 7 , wherein the network is the Internet. 
     
     
         9 . The system of  claim 7 , wherein said wholesale price data is obtained from a database connected to said network. 
     
     
         10 . The system of  claim 6 , wherein said computer-determined retail prices are profit-maximizing retail prices. 
     
     
         11 . A machine-readable medium for determining prices and order quantities that maximize a retailer's total profit for a specific product category by:
 instructing a computer to determine demand for products based on a distribution of upper limits of prices each customer is willing to pay for each of a plurality of products and based on given proposed retail prices;   instructing a computer to determine an amount of each of products to be ordered by calculating profit based on one or more of
 available wholesale price data, 
 proposed retail prices, and 
 said determined demand at said proposed retail prices; 
   instructing a computer to determine retail prices based on
 available wholesale prices, 
 a distribution of upper limits of prices each customer is willing to pay for each of given products, and 
 said determined demand for products and said determined order quantities, both depending on retail prices; and 
   instructing a computer to provide the resulting list of quantities and prices as one or more of
 a printout, 
 a machine-readable data output to storage, and 
 directly as input to data processing. 
   
     
     
         12 . The machine-readable medium of  claim 11 , wherein the computer being instructed is connected to a network. 
     
     
         13 . The machine-readable medium of  claim 12 , wherein the network is the Internet. 
     
     
         14 . The machine-readable medium of  claim 12 , wherein said wholesale price data is obtained from a database connected to said network. 
     
     
         15 . The machine-readable medium of  claim 11 , wherein said computer-determined retail prices are profit-maximizing retail prices. 
     
     
         16 . A method for determining prices and order quantities that maximize a retailer's expected profit for a specific product category comprising the steps of:
 using a customer survey to determine prices customers are willing to pay for a product; and   based on said survey, defining a model of customers' in-store brand choice as a function of a distribution of prices customers are willing to pay.   
     
     
         17 . The method of  claim 16 , wherein said prices are maximum prices customers are willing to pay.