Improving Profits by Bundling Vertically Differentiated Products

Honhon, Dorothée; Pan, Xiajun Amy

doi:10.1111/poms.12686

Cited by 41 publications

(25 citation statements)

References 32 publications

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“…To understand which is more valuable by consumers, bundles or individual products is the first subject under research. This understanding is relevant, as several authors advocate distinct scenarios: bundling is widely implemented for information goods and online services because it can increase profit for companies (Ye et al 2017); bundling is an effective strategy for companies to increase revenues (Honhon and Pan 2017); bundles generally are not preferred over separate products (Knutsson 2011).…”

Section: Individual Products or Bundlesmentioning

confidence: 99%

Preference between Individual Products and Bundles: Effects of Complementary, Price, and Discount Level in Portugal

Martins

Rodrigues

Martíns

et al. 2021

JRFM

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This paper aims to (1) compare consumers’ preferences between individual products and bundles as well as (2) investigate some of the factors involved in bundle characteristics that may affect consumer’s preferences. Those factors are complementarity, price level, and discount level. An online survey developed by means of questionnaires were collected from the Portuguese population. Student’s t-tests were used to test the hypothesis formulated and to analyze the consumers’ preferences. The findings corroborate that in a scenario where the bundle does not offer any discounts, preference of individual products is higher. When a 20% discount is assigned to bundles, the overall preference for individual products is still superior. By offering a discount level of 45%, the overall preference for bundles becomes higher. The positive effect of complementarity bundles valuation is confirmed. This is the first approach to evaluate the preferences between bundles and individual products in the Portuguese market. The findings contribute to clarify the customer map within a Business Model Canvas. Furthermore, this paper analyzes the bundle complementarity and discount level effects simultaneously.

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Section: Individual Products or Bundlesmentioning

confidence: 99%

Preference between Individual Products and Bundles: Effects of Complementary, Price, and Discount Level in Portugal

Martins

Rodrigues

Martíns

et al. 2021

JRFM

View full text Add to dashboard Cite

show abstract

“…Prior studies have found that PB could be more profitable (compared to MB) because of network externality (Prasad et al , 2010), limited supply of a product (Cao et al , 2015), bundling vertically differentiated products (Honhon and Pan, 2017), or negatively correlated reservation prices and high starting inventory levels (Bulut et al , 2009). This work has produced the following important and interesting findings.…”

Section: Discussionmentioning

confidence: 99%

Bundling cloud software to fight piracy: an economic analysis

Zhang

Yue²,

Hui

2019

INTR

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Purpose The emergence of internet-enabled technology has led to the software service model in which the software firm, instead of the consumer, maintains software ownership. This model can curtail software piracy more effectively than the traditional on-premises software model. However, software firms are not abandoning traditional on-premises software but embracing both models simultaneously. In this study, the authors consider a firm’s software bundling decision in combination with its piracy deterrence strategy. The paper aims to discuss these issues. Design/methodology/approach The authors build three stylized models to analytically compare the bundling strategies under three scenarios: no piracy, piracy is present and piracy is present while the firm applies digital rights management (DRM). Findings The authors find pure bundling (PB) to be the optimal strategy due to the combination of competition and cannibalization effects in mixed bundling (MB). Simultaneously, consumers may enjoy greater surplus in PB than in MB, making PB the preferred strategy for both the firm and consumers. Interestingly, the win-win outcome coexists with some degree of piracy in the market. Originality/value The results provide important insights for firms and policy-makers and contribute to the literature on piracy and product bundling. First, the authors show piracy could be another driver for product bundling, which has never been discussed in prior literature. Second, the authors suggest an alternative perspective; that PB may be a desirable outcome for both firms and consumers when considering piracy and DRM. More surprisingly, this desirable outcome occurs with some level of piracy in the market. The presence of piracy leads to competition and cannibalization effects in MB, which eventually results in the win-win outcome in the software market for both the firm and the consumers.

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“…Therefore, in an e-retailer-dominated Stackelberg market, according to (18) and (19), the supply chain's optimal profit, denoted by π(p r 12 , w r 12 ), is:…”

Section: E-retailer-dominated Stackelberg Modelmentioning

confidence: 99%

“…In particular, they determine wholesale prices and optimal offline/online prices. Honhon et al [19] consider vertically differentiated goods that can be sold individually or in bundles and described optimal bundling strategies. Sarkar et al [33] apply the Stackelberg game policy to determine sales strategies for two products.…”

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confidence: 99%

Independent sales or bundling? Decisions under different market-dominant powers

Feng¹,

Chen²

2021

JIMO

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Enterprises are aware that bundling strategies can improve profitability in the highly competitive marketplace. This study evaluates an online to offline (O2O) supply chain system made up of a supplier and an e-retailer who can sell two products independently or bundled through online and offline channels, and discuss the influence of pricing strategy and channel choice on profit under different market-dominant powers. Based on a game theory model, we derive an optimal wholesale price for the supplier, an optimal sale price for the e-retailer, and their respective profit. We demonstrate that a Stackelberg leader is more profitable, irrespective of whether independent sales or bundling are chosen. Regardless of who the leader is, the whole supply chain receive equal profit. For a market leader, independent sales or bundling decisions should be made according to market size. Sensitivity analysis show that as the self-price sensitivity coefficient increases, the profit monotonically decreases for both independent sales and bundling; this occur for both the market dominated by the supplier and that dominated by the e-retailer. For independent sales, as the cross-price sensitivity coefficient increases, the profit monotonically increases; for bundled sales, the profit of the game players is not affected.

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Improving Profits by Bundling Vertically Differentiated Products

Cited by 41 publications

References 32 publications

Preference between Individual Products and Bundles: Effects of Complementary, Price, and Discount Level in Portugal

Preference between Individual Products and Bundles: Effects of Complementary, Price, and Discount Level in Portugal

Bundling cloud software to fight piracy: an economic analysis

Independent sales or bundling? Decisions under different market-dominant powers

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