Optimal bundling of products with different environmental impacts considering consumer environmental awareness

Abstract

Emission reduction has become a critical and urgent issue in marketing. We notice that some companies develop new products to exclusively solve the pollution emission from the existing polluting products. This paper aims to research the optimal bundling problem of a monopoly seller who offers a polluting product and the new green product when considering consumer environmental awareness. First, by comparing the maximum profit of bundling strategies, we reveal that bundling strategies always dominate the pure component (PC) strategy. More specifically, the pure bundling (PB) strategy dominates when the marginal costs are low and the green product performs well in emission reduction; otherwise, mixed bundling dominates. Second, by analyzing the net pollution emission of different strategies, we show that although bundling strategies benefit the seller economically, they may not be optimal environmentally when the green product is not effective. Numerical studies are constructed to show our findings intuitively. Further, this provides useful managerial insights to enterprises and government regulators. To help achieve emission reduction target, government regulators should implement emission regulations to regulate enterprises’ behavior. Besides, the enterprise should be more cautious when the emission regulation exists or when the enterprise itself is also environmentally aware since more profit may also mean more pollution.