This paper aims to address the following problems: What are the firms’ optimal pricing and quality policies under three scenarios (no bundling, pure bundling and mixed bundling)? In what condition will one bundling strategy dominate the others? How does the degree of complementarity affect the firms’ decision?
Using the game theory, this study first establishes three models of bundling strategies: no bundling, pure bundling and mixed bundling and then obtains the optimal prices and quality decisions. This study uses numerical analysis to explore the relationships between the prices (demands and profits) and some key parameters and to obtain some valuable management complications.
Some interesting and valuable management implications are established: regardless of the degree of complementarity, adopting a pure bundling or mixed bundling strategy is better than separately selling an individual product; a high degree of complementarity leads to reduced profit in the no bundling and mixed bundling scenarios, whereas the condition in the pure bundling strategy is the opposite; and when the degree of complementarity is adequately large, choosing pure bundling strategy is more profitable.
On the one hand, this study does not calculate the profit sharing ratio, and hence, the equilibrium profit sharing ratio can be explored in future work. On the other hand, marketing efforts (e.g. advertising and promotion) can be included in the study.
This study derives the necessary conditions for the most effective bundling strategy that maximizes firm’s profits, and these conclusions can provide a decision reference to the bundling decisions of firms.
First, the optimal bundling strategies in a horizontal supply chain consisting of two firms is considered. Under the pure and mixed bundling strategies, the two firms sell the bundled product by building a cooperative program. Second, both the pricing policies and quality decisions of supply chain members under the different bundling strategies are studied.
This work was supported by the National Natural Science Foundation of China (Grant Numbers 71502076 and 71561018), the Natural Science Foundation of Jiangxi Province, China (Grant Number 20151BAB211005), and the Graduate Innovation Foundation of Nanchang University, China (Grant Number CX2017037).
Xu, Q., Xu, B., Wang, P. and He, Y. (2018), "Bundling strategies for complementary products in a horizontal supply chain", Kybernetes, Vol. 47 No. 6, pp. 1158-1177. https://doi.org/10.1108/K-02-2017-0082Download as .RIS
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