The Price Bundling of Services: A Normative Framework

Guiltinan, Joseph P.

doi:10.2307/1251130

Cited by 316 publications

(119 citation statements)

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“…This reflects the assumption that the products are individually valued and is adopted by many authors (e.g., Adams and Yellen (1976), Schmalensee (1984), McAfee et al (1989)). Guiltinan (1987) refers to this assumption as the assumption of strict additivity. Venkatesh and Kamakura (2003) relax the strict additivity assumption and allow for substitutability and complementarity.…”

Section: Model and Analysismentioning

confidence: 99%

Bundle pricing of inventories with stochastic demand

Bulut

Gürler

Şen

2009

European Journal of Operational Research

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We consider a retailer selling a fixed inventory of two perishable products over a finite horizon. The products are sold individually or as part of a bundle. The customers arrive following a Poisson Process and each customer makes a purchasing decision based on her reservation prices of individual products: she either buys one of the individual products, buys the bundle or leaves without a purchase. Assuming that the customer reservation prices follow a bivariate distribution, we determine the optimal product and the bundle prices that maximize the expected revenue. The performances of three bundling strategies (mixed bundling, pure bundling and unbundling) under different reservation price distributions, demand arrival rates and starting inventory levels are compared. The impact of the shape of the reservation prices is also investigated by considering both the bivariate normal and bivariate gamma densities, the latter of which has not been considered before in the literature. Our numerical results based on the bivariate normal reservation prices indicate that the performances of the policies heavily depend on the parameters of the demand process and the initial inventory levels. Bundling is observed to be most effective with negatively correlated reservation prices and when the starting inventory levels are high. When the starting inventory levels of two products are equal, most of the benefits of bundling can be achieved through pure bundling in case of excess supply. However, the mixed bundling strategy clearly dominates the other two when the starting inventory levels are not equal. Our numerical results show that bundling becomes more effective and the expected revenues increase as the products become less substitutable and more complementary. We also observe that the correct modeling of the reservation price distribution is important, and the use of sub-optimal prices resulting from assuming bivariate normal density when in fact the appropriate distribution is bivariate gamma may result in significant losses in the expected revenue especially if the reservation prices are negatively correlated. Finally, the model is extended to allow for price changes during the selling horizon using a dynamic programming formulation. It is shown that offering price bundles mid-season may be a more effective mechanism than changing individual product prices.

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Section: Model and Analysismentioning

confidence: 99%

Bundle pricing of inventories with stochastic demand

Bulut

Gürler

Şen

2009

European Journal of Operational Research

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“…Two definitions of bundling are 'marketing practice for two or more products and/or service in a single package with a special price' (Guiltinan, 1987) and 'selling two or more separate products in one package' (Stremersch & Tellis, 2002).…”

Section: Bundlingmentioning

confidence: 99%

“…In the mixed-bundling strategy, marketers offer separate products and a bundle of the products (Adams & Yellen, 1976;Stremersch & Tellis, 2002). The latter strategy is called mixed-price bundling (Guiltinan, 1987). Mixed-bundling has the highest profitability among the other two strategies (Chen & Riordan, 2013;Venkatesh & Kamakura, 2003;Yang & Ng, 2010).…”

Section: Bundlingmentioning

confidence: 99%

Competition and Cooperation in Economics and Business

Husodo¹,

Gitaharie²,

Gani³

et al. 2017

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Although all care is taken to ensure integrity and the quality of this publication and the information herein, no responsibility is assumed by the publishers nor the author for any damage to the property or persons as a result of operation or use of this publication and/or the information contained herein. Business -Gani et al. (Eds) © 2018 Taylor & Francis Group, London, ISBN 978-1-138-62666-9 v Business -Gani et al. (Eds) © 2018 Taylor & Francis Group, London, ISBN 978-1-138-62666-9 ix Preface This book is one of the five volumes of proceedings that provides an opportunity for readers to engage with selected papers presented at the 1st Asia-Pacific Forum for Research in Social Sciences and Humanities (1st APRISH) conference held in Depok (Indonesia) on November 7-9, 2016. Quoting the theme of the conference "Competition and Cooperation in the Globalized World," this book would be a valuable contribution to get a better understanding of the future global challenges. Readers will find a broad range of research reports on topics ranging from globalization, poverty, population and some macroprudential perspectives on managing the risk of a more integrated world. One of the unique and valuable dimensions of this conference is the capability for blending the chemistries among educators, students, and researchers from around the world to discuss globalization in a broad spectrum. The reader will discover both common challenges and creative solutions emerge from very diverse settings. The relevance of the conference's theme, towards an evidence-based society, for a variety of disciplines, is reflected in the diverse range of papers that have been submitted for publication. These serve to demonstrate the natural attraction of the conference for sharing ideas and findings within an international community. Overall, the conference was undoubtedly very successful. Plenary lectures and presentations were successfully bridging the gap between the different fields of social sciences, making it possible for non-experts in a given area to gain insight into new areas. Also, among the speakers there were some young scientists, namely, doctoral, master's and undergraduate students, who bring new perspectives to their fields. Terms of use: Documents in EconStor may Competition and Cooperation in Economics and Competition and Cooperation in Economics andThe editors would like to thank all those who have contributed to submit full papers for this conference. We rece...

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“…If the two products are independent in demand, some customers who would buy only one of the products, if they were priced separately, will now buy both in the form of the bundle. The reason for this is that the value some customers place on one product is so much greater than its price that the combined value of the two products exceeds the bundled price (Guiltinan, 1987).…”

Section: Capacity For Bundlingmentioning

confidence: 99%

The strategic role of unused service capacity

Wirtz

Lee

1999

International Journal of Service Industry Management

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Services are by nature perishable. As such, managing a service firm's capacity to match supply and demand has been touted as one of the key problems of services marketing and management practice. This paper advances an alternative perspective of unused service capacity.Based on a review of current literature and an exploratory study, this paper employs a theory-inuse methodology to map out a set of capacity strategy propositions. These propositions show that unused capacity could be employed as a resource to achieve a series of strategic objectives that serve to improve the performance of the firm. The paper also suggests a re-look at capacity policies and proposes that service firms should therefore approach capacity management not only from the standpoint of operations management but from that of marketing as well.

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The Price Bundling of Services: A Normative Framework

Cited by 316 publications

References 0 publications

Bundle pricing of inventories with stochastic demand

Bundle pricing of inventories with stochastic demand

Competition and Cooperation in Economics and Business

The strategic role of unused service capacity

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