Pricing problem in wireless telecommunication product and service bundling

Bibo Yang and C.T. Ng

European Journal of Operational Research, 2010, vol. 207, issue 1, 473-480

Abstract: This paper investigates a mixed bundling problem in the wireless telecommunication business. Customers can buy cellular phones at a discount price if they subscribe to a service plan with the price above a threshold. We have proposed using nonlinear mixed-integer programming to determine the optimal price to maximize the total profit of the service providers. An efficient algorithm has been presented to solve this problem when discrete demand data is available. We have compared the profits from three strategies: individual sale, mixed bundle and pure bundle. Our analysis suggests the condition under which the mixed bundle strategy outperforms other strategies. We have also studied the impact of parameters on the solution. The results of the analysis may help the service providers adjust their pricing schemes according to changes in the market. In the case of incomplete information (only the distribution of the demand is known), we apply another research approach (partition graph) to determine the optimal bundle price.

Keywords: Bundle; Pricing; Nonlinear; programming; Telecommunication (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:207:y:2010:i:1:p:473-480

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