Bundling or Unbundling? Pricing Strategy for Complementary Products in a Green Supply Chain

Haiyan Shan,Guo Wei,Chen Zhang

doi:10.3390/su12041331

Abstract

Retailers usually sell complementary products jointly with a discounted price to attract more consumers. However, the difference of complementary degree between products leads to the diversity of pricing. In parallel, with the development of green supply chains, the extra cost of manufacturers to conduct ecological product design makes the pricing of complementary products further complicated. Thus, it is important to clarify the pricing strategy for complementary products in a green supply chain. Based on the Stackelberg games between two manufacturers and a retailer, this paper constructs three pricing models to simultaneously analyze the changes in the optimal profits of supply chain members and the optimal green manufacturing degree of complementary products. The results demonstrate that: (i) In most cases, two manufacturers prefer the pure bundling pricing strategy, but the strategy preference of the retailer is complex. (ii) The green manufacturing is mutually beneficial for complementary manufacturers and worth advocating. (iii) The increasing sensitivity of consumers to the green manufacturing level of one product will also be detrimental to the improvement of the optimal green manufacturing level of its complementary products.

Highlights

In order to fill this research gap, this paper aims to study the pricing strategy for complementary products in the green supply chain, and the following questions will be settled: (i) What is the optimal pricing strategy for complementary products in a green supply chain? (ii) How do the profits of green supply chain members change under a variety of bundling strategies? (iii) How will the green investment of manufacturers, the cross-price elasticity and the sensitivity of consumers to the green manufacturing level affect the green manufacturing levels of complementary products? We expect to find some valuable insights from the answers to these questions, so as to provide the theoretical basis for the pricing of complementary products in the green supply chain
This paper constructs a two-echelon green supply chain consisting of one retailer and two manufacturers, providing two complementary products
As we mainly study complementary products and the green supply chain, three parameters will be chosen as follows: the green input coefficient of Manufacturer 1 (η1), the cross-price elasticity (β), and the sensitivity of consumers to the green manufacturing level of products (λ1)

Summary

Introduction

The rapid growth of urbanization and industrialization improves people’s living standards and causes a series of negative issues, such as resource shortages, environmental degradation, and ecological crisis [1]. The severe reality has proven that minimizing environmental negative impact and maximizing resource efficiency throughout the life cycle of products, becomes increasingly important. As an important branch of operations management, the supply chain has a significant effect on the environment [2]. In order to improve ecological benefits, the concept of green supply chain management has recently emerged, and this approach integrates environmental issues into the common supply chain activities [3], so as to mitigate the damage to the environment in the process of transforming raw materials into final products. The lean process, innovation and the green paradigms are gradually considered as policies for strengthening the competitiveness of supply chains [4]

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Conclusion