Interpersonal bundling

Yongmin CHEN, Tianle ZHANG

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

7 Citations (Scopus)

Abstract

This paper studies a model of interpersonal bundling, in which a monopolist offers a good for sale under a regular price and a group purchase discount if the number of consumers in a group—the bundle size—belongs to some menu of intervals. We find that this is often a profitable selling strategy in response to demand uncertainty, and it can achieve the highest profit among all possible selling mechanisms. We explain how the profitability of interpersonal bundling with a minimum or maximum group size may depend on the nature of uncertainty and on parameters of the market environment, and we discuss strategic issues related to the optimal design and implementation of these bundling schemes. Our analysis sheds light on popular marketing practices such as group purchase discounts, and it offers insights on potential new marketing innovation.
Original languageEnglish
Pages (from-to)1456-1471
Number of pages16
JournalManagement Science
Volume61
Issue number6
Early online date10 Dec 2014
DOIs
Publication statusPublished - Jun 2015

Fingerprint

Bundling
Purchase
Discount
Marketing innovation
Demand uncertainty
Group size
Profitability
Strategic issues
Menu
Market environment
Marketing practices
Uncertainty
Profit
Monopolist

Keywords

  • bundling
  • demand uncertainty
  • group discount
  • group purchase
  • interpersonal bundling

Cite this

CHEN, Yongmin ; ZHANG, Tianle. / Interpersonal bundling. In: Management Science. 2015 ; Vol. 61, No. 6. pp. 1456-1471.
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Interpersonal bundling. / CHEN, Yongmin; ZHANG, Tianle.

In: Management Science, Vol. 61, No. 6, 06.2015, p. 1456-1471.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AB - This paper studies a model of interpersonal bundling, in which a monopolist offers a good for sale under a regular price and a group purchase discount if the number of consumers in a group—the bundle size—belongs to some menu of intervals. We find that this is often a profitable selling strategy in response to demand uncertainty, and it can achieve the highest profit among all possible selling mechanisms. We explain how the profitability of interpersonal bundling with a minimum or maximum group size may depend on the nature of uncertainty and on parameters of the market environment, and we discuss strategic issues related to the optimal design and implementation of these bundling schemes. Our analysis sheds light on popular marketing practices such as group purchase discounts, and it offers insights on potential new marketing innovation.

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