Bundling Strategies For Competing Mobile Phone Supply Chains With Network Externality

As a mobile communication terminal device that accesses network,mobile phone integrates the two functions of mobile communication and wireless access to the Internet,greatly enriching people's lives.The demand for mobile devices,especially mobile phones,is growing.However,the increase of revenue does not guarantee that each member within the Mobile Phone Supply Chain(MPSC)will gain more profits due to the intense competition.Faced with these challenges,the management of MPSC has become an interesting topic.Unlike the traditional supply chain,MPSC has some characterizations,such as there exists a dual-sources for consumers in MPSC.Consumers can choose their handsets and services as a bundled package from Mobile Phone Manufacturers(MPM),Telecommunication Service Operators(TSO),and third party retailers,or alternatively,they can buy handsets from MPMs and services from TSOs,respectively.Besides,MPMs and TSOs provide products and services,respectively,and the decisions of both parties will affect the final purchase behaviour of consumers.This paper considers two competing MPSCs including one MPM and one TSO in each supply chain in the presence of network externality,using multi-agent simulation,combined with reinforcement learning algorithms.And we considered two different ways of bundled scenario: subsidy contract and revenue sharing contract.This paper also explores the impact of network externality,consumer heterogeneity and the revenue-sharing ratio on the supply chain and the members.The main results can be obtained as follows: first of all,no matter what ways to be used in bundled scenario,we conclude that in general(as long as the impact of network externality is not too small),when one party adopts a bundled scenario,competitive differentiation can be formed.The competitive differentiation is able to alleviate price competition thereby making the entire market profitable.The MPSC adopting bundled scenario would gain higher profits.However,due to more intense competition,the overall market profit will decrease if bundled scenario is adopted by both MPSCs.Then TSO has an incentive to adopt bundled scenario when the main competitor adopts free scenario;otherwise,TSO should not adopt it.The case in China has proved this.China Mobile took the lead in adopting a bundled scenario to launch CMCC-Customizeddevice sales.Then,the competitors China Telecom and China Unicom also launched their own custom device.However,it was not long before China Telecom and China Unicom abandoned the sales of customized device and began to promote the All-Modes device(i.e.,reusing free scenario).At the same time,we find that the network externality forms competitive differentiation.And the suggestions about whether it is necessary to improve the network externality of products(or services)for MPMs and TSOs are given.Besides,in the experiment using subsidy contracts,we find that consumer heterogeneity also has a significant impact on the supply chain.In the symmetric settings,consumer heterogeneity could alleviate competition to some extent.While in the asymmetric setting,it increases the profit advantage of bundled scenario.In the experiment using revenue-sharing contracts,we find that for MPM,bundling scenario can always increase its profits.Therefore,MPM are always motivated to accept or actively seek the TSO to use bundled scenario.By analyzing the impact of the revenue-sharing ratio on the supply chain,it is found that a too small revenue-sharing ratio will make the MPM unable to accept the bundling scenario;while an excessively high sharing ratio will make the TSO have no incentive to adopt the bundling scenario.Although it is found that there is a revenue-sharing ratio that maximizes the total profit of the supply chain in the experiment,the profits of TSO have been decreasing as the revenue-sharing ratio has increased.The determination of the revenue-sharing ratio still depends on the bargaining power among members of the MPSC.