Bundling Strategy and Channel Competition in Supply Chains with Complementary Products

Abstract

We investigate the bundling strategy in a two-stage supply chain with the channel competition and analyze the effects of bundling strategy on supply chain decisions and performance. In this paper, we consider two kinds of channel competition, which are from outside the supply chain and inside the supply chain, and also consider two kinds of competitor’s product strategy with low or high quality. We proposed the game models for the different competition cases with bundling strategy and product quality strategy and obtain the optimal decisions. We find that the bundling is the leading retailer’s preferred strategy with the condition of the quality level of competitive components when she faces the channel competition outside the supply chain; and the retailer’s bundling profitability depends on the competitor’s products strategy in the supply chain setting with the inside competition. We also find that the profit of members and channel of supply chain will be improved under bundling strategy.