Demand is an important quantity in many optimization problems such as revenue management and supply chain management. Demand usually depends on “supply” (price and availability of products, f. e.), which in turn is decided on in the optimization model. Hence, demand is endogenous to the optimization problem. Choice-based optimization (CBO) merges discrete choice models with math programs. Discrete choice models (DCM) have been applied by both practitioners and researchers for more than four decades in various fields. DCM describe the choice probabilities of individuals selecting an alternative from a set of available alternatives. CBO determines (i) the availability of the alternatives and/or (ii) the attributes of the alternatives, i.e., the decision variables determine the availability of alternatives and/or the shape of the attributes. We present CBO applications to location planning, supply chain management, assortment and revenue management.
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