Bundling retail products: models and analysis

Bundling retail products: models and analysis

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Article ID: iaor20084368
Country: Netherlands
Volume: 177
Issue: 2
Start Page Number: 1197
End Page Number: 1217
Publication Date: Mar 2007
Journal: European Journal of Operational Research
Authors: , ,
Keywords: inventory: order policies
Abstract:

We consider the impact of bundling products on retail merchandising. We consider two broad classes of retail products: basic and fashion. For these product classes, we develop models to calculate the optimal bundle prices, order quantities, and profits under bundling. We use this analysis to establish conditions and insights under which bundling is profitable. Our analysis confirms that bundling profitability depends on individual product demands, bundling costs, and the nature of the relationship between the demands of the products to be bundled. We also provide detailed numerical examples.

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