Bundle pricing and inventory decisions on complementary products

Ata Allah Taleizadeh (), Masoumeh Sadat Babaei (), Seyed Taghi Akhavan Niaki () and Mahsa Noori-daryan ()
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Ata Allah Taleizadeh: University of Tehran
Masoumeh Sadat Babaei: Azad University, South Tehran Branch
Seyed Taghi Akhavan Niaki: Sharif University of Technology
Mahsa Noori-daryan: University of Tehran

Operational Research, 2020, vol. 20, issue 2, No 1, 517-541

Abstract: Abstract Selling correlated products faces the sellers with the cross-selling, which is a key factor in managing revenue and costs of the sellers. Cross-selling is a phenomenon which happens when the demands of products are correlated so that the demand for one of the correlated products automatically initiates demand of another. In these cases, different selling tactics such as bundling, tying, mixed bundling, etc. are applied to sell the items. In this paper, an integrated pricing-inventory model for two complementary products under three selling strategies is developed. In the first model, it is assumed that the seller sells the products separately while those are packed and sold as bundling in the second model. The third model is extended in presence of a mixed-bundle strategy so that the products are presented as both bundling and single. The aim is to determine the optimal values of selling prices, bundle prices and order quantities of products along with the optimal period length so as the total profit is maximized. Moreover, optimal solutions are derived, solution algorithms are proposed, and at the end, numerical illustrations and also some sensitivity analyses are presented.

Keywords: Pricing; Inventory; Cross-selling; Complementary products; Bundling (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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DOI: 10.1007/s12351-017-0335-4

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