Optimal bundle formation and pricing of two products with limited stock

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dc.citation.epage462en_US
dc.citation.issueNumber2en_US
dc.citation.spage442en_US
dc.citation.volumeNumber118en_US
dc.contributor.authorGürler Ü.en_US
dc.contributor.authorÖztop, S.en_US
dc.contributor.authorŞen, A.en_US
dc.date.accessioned2016-02-08T10:04:50Z
dc.date.available2016-02-08T10:04:50Z
dc.date.issued2009en_US
dc.departmentDepartment of Industrial Engineeringen_US
dc.description.abstractIn this study, we consider the stochastic modeling of a retail firm that sells two types of perishable products in a single period not only as independent items but also as a bundle. Our emphasis is on understanding the bundling practices on the inventory and pricing decisions of the firm. One of the issues we address is to decide on the number of bundles to be formed from the initial product inventory levels and the price of the bundle to maximize the expected profit. Product demands follow a Poisson Process with a price dependent rate. Customer reservation prices are assumed to have a joint distribution. We study the impact of reservation price distributions, initial inventory levels, product prices, demand arrival rates and cost of bundling. We observe that the expected profit decreases as the correlation between the reservation prices of two products increases. With negative correlation, bundling cost has a significant impact on the number of bundles formed. When the product prices are low, the retailer sells individual products as well as the bundle (mixed bundling), when they are high, the retailer sells only bundles (pure bundling). The expected profit and the number of bundles offered decrease as the variance of the reservation price distribution increases. For high starting inventory levels, the retailer reduces bundle price and offers more bundles. The number of bundle sales decreases and the number of individual product sales increases when the arrival rate increases since the need for bundling decreases. Impacts of substitutability and complementarity of products are also investigated. The retailer forms more bundles, or charges higher prices for the bundle or both as the products become more complementary and less substitutable.en_US
dc.identifier.doi10.1016/j.ijpe.2008.11.012en_US
dc.identifier.issn0925-5273
dc.identifier.urihttp://hdl.handle.net/11693/22797
dc.language.isoEnglishen_US
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.ijpe.2008.11.012en_US
dc.source.titleInternational Journal of Production Economicsen_US
dc.subjectPricingen_US
dc.subjectProduct bundlingen_US
dc.subjectRevenue managementen_US
dc.titleOptimal bundle formation and pricing of two products with limited stocken_US
dc.typeArticleen_US
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