The selection of bundling or independent selling mode for new retailing platform with demand disruptions

Abstract

This study models a manufacturer that sells products and services through a platform with demand disruptions. To examine the selection of the platform operational selling mode, we consider pricing strategies in two selling modes: (1) In bundling selling mode, the manufacturer and platform are the same party, so their optimal decisions match, and they provide the product and service in a bundle, such that consumers can only buy the service together with the product. (2) In independent selling mode, the manufacturer and platform have independent optimal decisions, and they sell the product and service separately with different prices, allowing consumers to self-select whether to buy both or only the product. We show that the total profits of the supply chain in the independent mode will be larger than in the bundling mode when there is a negative demand disruption in either products or services because of the double marginalization effect. When there are demand disruptions, the profit contributed by services may exceed that from products. The numerical studies indicate that the platform would adopt bundling selling mode to maximize the whole profit when experiencing demand disruptions in product where the product demand disruptions are larger than ∆a or the service demand disruptions are larger than kcp − a.