Pricing and Bundling Strategies for Competing Mobile Phone Supply Chains With Network Externality

Abstract

In mobile phone supply chains, consumers can choose handsets and telecommunication services as a bundled package or buy handsets and services independently. This article develops a multi-agent simulation model to explore price, subsidy and bundling decisions for competing mobile phone supply chains with network externality, where each chain includes one mobile phone manufacturer and one service operator. There are two bundling strategies: free or bundled. The results indicate that: 1) if the impact of network externality is not too small, then competitive differentiation can be formed when one party adopts a bundled one. If bundled scenario is adopted by both, the total profit is reduced. Consequently, both service operators and manufacturers choose (accept) different bundling strategies; 2) network externality and consumer heterogeneity both increase the advantage of bundled scenario in the asymmetric setting; 3) when the effect of network externality is sufficiently small, free scenario is dominant; and 4) consumer heterogeneity can alleviate competition in the symmetric settings.