Bundling And Pricing Joint Decisions For Complementary Products In A Two Echelon Supply Chain

With the intense competition, bundling has been widely used as a popular marketing strategy to maximize profit in many industries. Especially, in supply chain environment, the bundling strategy presents some new characteristics. On the one hand, the differences of distribution channel may exert influence on the decisions; on the other hand, the interaction of different strategies including bundling strategy, pricing strategy and advertising strategy makes the decisions more commensal, and the joint decisions should be used, meanwhile, as the supply chian partners both can take a bundling strategy or not, the strategy intraction of different supply chain member would impact on the decisions as well as make the games more complex. Based on these analyses, this paper explores bundling and pricing decisions for two complementary products in a two-echelon supply chain. Hence, the innovative research study can be summarized as follows:From the distribution channel perspective, two different bundling models in a supply chian are built. In the traditional retailer channel supply chain, the research indicates that, for retailer, when the complementarities is high or the unit profit of bundled product is low, the pure component is a dominant strategy; when the complementarities and the unit profit of bundled product both are moderate, the mixed bundling is the optimal strategy; and the complementarities is low or the unit profit of bundled product is high, the pure bundling is the optimal strategy. In the interent direct channel supply chain, for the direct manufacturers, no matter the interent platform provider takes a bundling or not, they use the cooperative pricing strategy can obtain more profit; for the interent platform provider, the optimal bundling strategy is decided by the revenue sharing coefficient. When the value of the revenue sharing coefficient is moderate, the bundling is an optimal strategy, otherwise, the unbudling is an optimal strategy.We establish the bundling and pricing decision model under the revenue-sharing and advertising-sharing contract by taking into account the product cross elasticity and the advertisement spillover effect. The research indicates that both in a decentralized or centralized supply chain, the optimal advertising expenses of complementary goods are lower when the retailer takes a pure bundling sale strategy instead of taking a pure component. And, for retailer, when the complementarities is high or the advertising cost is low, the pure component is a dominant strategy; when the complementarities is moderately low and the advertising cost is high, the pure bundling is the optimal strategy. The results offer some guidance to the retailer's advertising and bundling decisions.We establish four pricing decision models by considering different portfolio strategies for the manufacturer and the retailer. By further analyzing and comparing equilibrium outcomes and profits from all four possible scenarios in order to solve the problems of optimal bundling and pricing decisions of manufacturers and retailers. Furthermore, we extent our model by considering different inventory strategies and market powers of retailers. The result shows that the upstream manufacturer always profits more when he sells complementary products separately. However, the optimal bundling decision of the downstream retailer is jointly determined by product complementarity (as a major factor) and difference of product profitability (as a secondary factor). Market power cannot exert influence on both optimal bundling decisions, but it can partly affect pricing decisions.