Scalable and Interpretable Contextual Bandits: A Literature Review and Retail Offer Prototype

TL;DR

This paper reviews CMAB methods and introduces a scalable, interpretable framework for dynamic offer selection in retail, combining advanced modeling, real-time explanation, and practical deployment to improve personalization and trust.

Contribution

It presents a novel scalable, interpretable CMAB framework with multi-category modeling, real-time explanations via LLM, and practical deployment in retail environments.

Findings

Enhanced learning efficiency through multi-category context modeling

Real-time, interpretable member profiling using LLMs

Demonstrated scalability and effectiveness in retail offer optimization

Abstract

This paper presents a concise review of Contextual Multi-Armed Bandit (CMAB) methods and introduces an experimental framework for scalable, interpretable offer selection, addressing the challenge of fast-changing offers. The approach models context at the product category level, allowing offers to span multiple categories and enabling knowledge transfer across similar offers. This improves learning efficiency and generalization in dynamic environments. The framework extends standard CMAB methodology to support multi-category contexts, and achieves scalability through efficient feature engineering and modular design. Advanced features such as MPG (Member Purchase Gap) and MF (Matrix Factorization) capture nuanced user-offer interactions, with implementation in Python for practical deployment. A key contribution is interpretability at scale: logistic regression models yield transparent weight vectors, accessible via a large language model (LLM) interface for real-time, user-level tracking and explanation of evolving preferences. This enables the generation of detailed member profiles and identification of behavioral patterns, supporting personalized offer optimization and enhancing trust in automated decisions. By situating our prototype alongside established paradigms like Generalized Linear Models and Thompson Sampling, we demonstrate its value for both research and real-world CMAB applications.