Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective
- PDF / 754,894 Bytes
- 25 Pages / 439.37 x 666.142 pts Page_size
- 22 Downloads / 172 Views
Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective Sarat Kumar Jena1
· Abhijeet Ghadge2
Accepted: 3 November 2020 © The Author(s) 2020
Abstract The paper studies product bundling in a duopoly supply chain network under the influence of different power-balance structures, bundling decisions and advertising efforts on total supply chain profit. Mathematical models comprising two manufacturers and a single retailer are developed to capture the impact of bundling policy and advertisement strategy under three power-balance structures, namely Manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash. Following game theory models and numerical examples, the study found that the total profit of the supply chain is undifferentiated under the manufacturer Stackelberg and Vertical Nash case in the manufacturer bundling and retailer bundling strategies. However, total supply chain profit under manufacturer bundling strongly dominates under retailer bundling in Retailer Stackelberg and Vertical Nash, and remains valid under multiple settings of market size, price elasticity and advertising elasticity. It is also found that manufacturer bundling is significantly affected by advertising effort compared to retailer bundling. The study contributes to the literature interfacing supply chain and marketing by studying bundling policy and advertising strategy simultaneously for homogenous products, under various power-balance structures and price competition. Keywords Bundling · Competition · Advertising · Supply chain · Pricing · Game theory
1 Introduction Bundling is a popular strategy adopted in marketing, which combines two or more products or services to maximise the chain’s profit (Bakos and Brynjolfsson 1999; Stremersch and Tellis 2002; Lancioni et al. 2005), though the pricing and advertising of these bundles remains an extremely challenging task. A bundle can consist of a group of complementary products (e.g., shampoo and conditioner; pizza and toppings), vertically differentiated products (e.g., DVD and Blu-ray disk bundle), independently valued products (e.g., coffee with teacup) or substitute products (e.g., two-ticket combination to a successive football match). They
B
Abhijeet Ghadge [email protected]
1
Xavier Institute of Management, Xavier University, Bhubaneswar, India
2
Centre for Logistics and Supply Chain Management, School of Management, Cranfield University, Bedford, UK
123
Annals of Operations Research
can also be made of multiple units of the same products. Bundling can involve product bundling or price bundling (Beheshtian-Ardakani et al. 2018). Product bundling defines integrated products that provides extra value to the customers and price bundling consists of a package sold at a discount rate, without any integration of the goods and/or services involved (Adomavicius et al. 2015; Giri et al. 2020; Jeitschko et al. 2017; Vamosiu 2018). In addition, depending on the number of items bundled, the nature of such items and the degree
Data Loading...
