Bundle pricing of inventories with stochastic demand
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In this study, we consider the single period pricing of two perishable products which are sold individually and as a bundle. Demands come from a Poisson Process with a price-dependent rate. Assuming that the customers’ reservation prices follow normal distributions, we determine the optimal product prices that maximize the expected revenue. The performances of three bundling strategies (mixed bundling, pure bundling and unbundling) under different conditions such as different reservation price distributions, different demand arrival rates and different starting inventory levels are compared. Our numerical analysis indicate that, when individual product prices are fixed to high values, the expected revenue is a decreasing function of the correlation coefficient, while for low product prices the expected revenue is an increasing function of the correlation coefficient. We observe that, bundling is least effective in case of limited supply. In addition, our numerical studies show that the mixed bundling strategy outperforms the other two, especially when the customer reservation prices are negatively correlated.
HF5415.152 .B85 2004