Pricing for Complementary and Substitute Products Simultaneously in the Package-Sale and Separate-Sale Considering Disruption Risk
Subject Areas :
1 - Assistant Professor, Department of Industrial Engineering, Mazandaran University of Science and Technology
Keywords: Pricing, Complementary Product, Substitute Products, Package Sale, Disruption Risk,
Abstract :
Objective: This paper aims to develop a pricing model for a seller offering both complementary and substitute goods (four products total), to simultaneously determine optimal prices under bundling and separate selling strategies while considering supply disruption risk.
Research Methodology: A mathematical model is proposed where a seller can offer two pairs of complementary goods—which are substitutes for each other—either individually or as bundles. Demand is modeled as a linear function of the product’s own price and the prices of other products. The model incorporates a disruption risk factor, where only a percentage of demand can be fulfilled if a disruption occurs. The model’s performance is validated using a numerical example and sensitivity analysis.
Findings: The results demonstrate that the bundling strategy yields higher total supply chain profit. This increase is attributed to the lower bundled prices, which stimulate greater overall demand compared to selling the products separately.
Originality/Scientific Value Added: This research contributes a novel pricing model that concurrently addresses product complementarity, substitution, bundling strategy, and disruption risk. It provides a quantitative framework for decision-makers to evaluate the profitability of bundling in an uncertain environment.
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