To Have Your Cake and Eat It? A Two-Period Model for RetailersMixed Bundling or Reserved Product Pricing Strategies in Response to Supplier Encroachment

Abstract

In practice, many brand products retailers have adopted mixed bundling (MB) and reserved product pricing (RPP) in response to external competition, such as suppliers encroachment. There is scanty literature which addresses such exibility among retailers and its impact on a dual-channel supply chain. To ll this void, we considered a two-period dual-channel model in which one of the two manufacturers sells a product through a direct channel; and through an independent retailer who can bundle two manufacturers products together (Model M) and reduce their reservation prices (Model R). Our central result demonstrates that, although both MB and RPP strategies can indeed improve retailers pro tability, MB strategy creates strategic issues that are signi cantly different from that of RPP strategy. More speci cally, relative to MB strategy, the retailers RPP strategy is always detrimental to the manufacturer. Finally, to avoid the retailers strategic choice for RPP, we designed a revenue sharing contract which can achieve perfect coordination of the supply chain ecosystem