Learning to Price Bundles: A GCN Approach for Mixed Bundling
This addresses a classic revenue management problem in industries like e-commerce, offering a scalable solution for mixed bundling with incremental improvements over existing methods.
The paper tackles the intractable bundle pricing problem by using graph convolutional networks (GCNs) to learn optimal bundle patterns, achieving near-optimal solutions (better than 97%) with reduced computational time for small to medium problems and outperforming other heuristics for larger instances.
Bundle pricing refers to designing several product combinations (i.e., bundles) and determining their prices in order to maximize the expected profit. It is a classic problem in revenue management and arises in many industries, such as e-commerce, tourism, and video games. However, the problem is typically intractable due to the exponential number of candidate bundles. In this paper, we explore the usage of graph convolutional networks (GCNs) in solving the bundle pricing problem. Specifically, we first develop a graph representation of the mixed bundling model (where every possible bundle is assigned with a specific price) and then train a GCN to learn the latent patterns of optimal bundles. Based on the trained GCN, we propose two inference strategies to derive high-quality feasible solutions. A local-search technique is further proposed to improve the solution quality. Numerical experiments validate the effectiveness and efficiency of our proposed GCN-based framework. Using a GCN trained on instances with 5 products, our methods consistently achieve near-optimal solutions (better than 97%) with only a fraction of computational time for problems of small to medium size. It also achieves superior solutions for larger size of problems compared with other heuristic methods such as bundle size pricing (BSP). The method can also provide high quality solutions for instances with more than 30 products even for the challenging cases where product utilities are non-additive.