Supply Chain Coordination of Product and Service Bundling Based on Network Externalities

Zhenhua Gao, Luyao Zhao and Hongjun Wang
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Zhenhua Gao: School of Management Science and Engineering, Anhui University of Technology (AHUT), Ma’anshan 243032, China
Luyao Zhao: School of Management Science and Engineering, Anhui University of Technology (AHUT), Ma’anshan 243032, China
Hongjun Wang: School of Management Science and Engineering, Anhui University of Technology (AHUT), Ma’anshan 243032, China

Sustainability, 2022, vol. 14, issue 13, 1-19

Abstract: Since the commercialization of 5G, the government has actively encouraged 5G industry chain enterprises to accelerate the progress of 5G. Bundling is a popular means to expand 5G subscribers and improve 5G market coverage. Considering the characteristics of bundling, this study establishes a secondary supply chain composed of a terminal manufacturer and a telecom operator under the condition of network externality strength. In this supply chain, the product quality of the terminal manufacturer is complementary to the service quality of the telecom operator. Using Steinberg’s theory, we derive the optimal value of each decision variable in a centralized mode and a decentralized mode and take profit maximization as the goal. This paper also designs a contract of bidirectional cost sharing and revenue compensation for supply chain coordination. Finally, the influence of network externality strength and a mass-additive factor on the supply chain is discussed using numerical analysis. The results show that higher network externality strength has a significant impact on product pricing, the quality of each entity and the profit of the supply chain. At the same time, the degree of complementarity between the terminal product quality and the telecommunications service quality affects whether consumers choose to buy contract products. A higher degree of complementarity promotes the market inflow into high-end consumers.

Keywords: network externalities; bundling; complementary; pricing coordination (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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