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Research Note---Competitive Bundling and Counterbundling with Generalist and Specialist Firms

Authors:

Subramanian BalachanderAuthors Info & Claims

Management Science, Volume 53, Issue 1

Pages 159 - 168

https://doi.org/10.1287/mnsc.1060.0601

Published: 01 January 2007 Publication History

Abstract

Bundling, which is the practice of selling two or more products or services in a package, is a pervasive marketing practice and is often used as a strategic competitive tool. However, there has not been enough consideration of competitive bundling situations in which exit of a competitor is not a concern. In this paper, we address this issue by identifying conditions under which strategic competitors may or may not resort to bundling when competitor exit considerations are absent. We study competition between a multiproduct generalist firm and two single-product specialist firms in two product categories, one of which has undifferentiated products and the other has differentiated products. In our model, the specialist firms can form an alliance to bundle their products in competing with the generalist firm. In contrast to the previous literature, we find that concurrent bundling by competitors, if it occurs in equilibrium, is profitable. We also find that when one competitor bundles and the other does not, the bundling firm gains a greater share of customers and makes a higher profit. However, when conditions favor counterbundling by a competitor, such counterbundling helps the competitor retain its customers. Finally, we note that under other market conditions, concurrent bundling by competitors escalates price competition to the extent that retaining customers through bundling is not profitable. In such a case, we show that strategic competitors are better off having asymmetric product lines with one competitor bundling and the other selling unbundled.

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Cited By

Zhou LXu YChen KMa Y(2019)Two-phase bundling strategy with limited capacityProceedings of the 10th International Conference on E-Education, E-Business, E-Management and E-Learning10.1145/3306500.3306508(374-378)Online publication date: 10-Jan-2019
https://dl.acm.org/doi/10.1145/3306500.3306508
Zhu CYao Z(2018)Comparison between the agency and wholesale model under the e-book duopoly marketElectronic Commerce Research10.1007/s10660-017-9256-918:2(313-337)Online publication date: 1-Jun-2018
https://dl.acm.org/doi/10.1007/s10660-017-9256-9
Subramanian URaju JZhang Z(2013)Exclusive Handset Arrangements in the Wireless IndustryMarketing Science10.5555/2465124.246513032:2(246-270)Online publication date: 1-Mar-2013
https://dl.acm.org/doi/10.5555/2465124.2465130
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Research Note---Competitive Bundling and Counterbundling with Generalist and Specialist Firms

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cover image Management Science

Management Science Volume 53, Issue 1

January 2007

168 pages

ISSN:0025-1909

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INFORMS

Linthicum, MD, United States

Publication History

Published: 01 January 2007

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Cited By

Zhou LXu YChen KMa Y(2019)Two-phase bundling strategy with limited capacityProceedings of the 10th International Conference on E-Education, E-Business, E-Management and E-Learning10.1145/3306500.3306508(374-378)Online publication date: 10-Jan-2019
https://dl.acm.org/doi/10.1145/3306500.3306508
Zhu CYao Z(2018)Comparison between the agency and wholesale model under the e-book duopoly marketElectronic Commerce Research10.1007/s10660-017-9256-918:2(313-337)Online publication date: 1-Jun-2018
https://dl.acm.org/doi/10.1007/s10660-017-9256-9
Subramanian URaju JZhang Z(2013)Exclusive Handset Arrangements in the Wireless IndustryMarketing Science10.5555/2465124.246513032:2(246-270)Online publication date: 1-Mar-2013
https://dl.acm.org/doi/10.5555/2465124.2465130
Shulman JGeng X(2013)Add-on Pricing by Asymmetric FirmsManagement Science10.1287/mnsc.1120.160359:4(899-917)Online publication date: 1-Apr-2013
https://dl.acm.org/doi/10.1287/mnsc.1120.1603
Li YJhang-Li JHwang TChen P(2012)Analysis of pricing strategies for community-based group buyingInformation Systems Frontiers10.1007/s10796-010-9290-914:3(633-645)Online publication date: 1-Jul-2012
https://dl.acm.org/doi/10.1007/s10796-010-9290-9
Jiang YShang JKemerer CLiu Y(2011)Optimizing E-tailer Profits and Customer SavingsMarketing Science10.1287/mksc.1100.063130:4(737-752)Online publication date: 1-Jul-2011
https://dl.acm.org/doi/10.1287/mksc.1100.0631
Balachander SGhosh BStock A(2010)Why Bundle Discounts Can Be a Profitable Alternative to Competing on Price PromotionsMarketing Science10.5555/2806756.280675729:4(624-638)Online publication date: 1-Jul-2010
https://dl.acm.org/doi/10.5555/2806756.2806757
Prasad AVenkatesh RMahajan V(2010)Optimal Bundling of Technological Products with Network ExternalityManagement Science10.1287/mnsc.1100.125956:12(2224-2236)Online publication date: 1-Dec-2010
https://dl.acm.org/doi/10.1287/mnsc.1100.1259
Basu AVitharana P(2009)Research Note---Impact of Customer Knowledge Heterogeneity on Bundling StrategyMarketing Science10.5555/2882576.288257728:4(792-801)Online publication date: 1-Jul-2009
https://dl.acm.org/doi/10.5555/2882576.2882577
Jeuland AShugan S(2008)Commentary---Managing Channel ProfitsMarketing Science10.5555/2882728.288273727:1(49-51)Online publication date: 1-Jan-2008
https://dl.acm.org/doi/10.5555/2882728.2882737

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