Pricing strategies for bundled products considering consumers’ green preference

Abstract

Considering consumers' preference for green consumption, firms provide independent main products alone to reduce the waste induced by repeated purchases of complementary products. This paper divides consumers into four types according to their greenness and previous purchase experiences, and theoretically investigates the advantages and disadvantages of the uniform pricing strategy and the differentiated pricing strategy for the main product and the bundled product. We find that: (i) the uniform pricing strategy ensures a stable pricing decision since the optimal price is irrelevant to consumers' preference for green consumption. In contrast, under the differentiated pricing strategy, the optimal prices of the bundled product and the main product decrease and increase with consumers' preference for green consumption, respectively. Under asymmetric information, the firm will misprice the products and accordingly suffer from a profit loss if it adopts the differentiated pricing strategy. (ii) When consumers’ preference for green consumption is intermediate, the uniform pricing strategy dominates the differentiated pricing strategy for the firm, while for consumers and society, the differentiated pricing strategy is better. However, the information asymmetry may hurt consumer surplus and social welfare under the differentiated pricing strategy. Therefore, consumers have incentives to actively disclose their preference for green consumption to avoid damage. Then, a win-win-win (i.e., the firm, consumers, and society) situation will occur.