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Electronic Commerce Research

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05-01-2021

Online sequential bundling: profit analysis and practice

Authors: Amit Gayer, Avishay Aiche, Eli Gimmon

Published in: Electronic Commerce Research | Issue 4/2022

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Abstract

We investigate monopoly profit under a new online tying strategy, namely sequential bundling. This method allows customers to buy additional products at discounted prices immediately after purchasing one or some of the available products. This strategy has been practiced by Walmart and others but has not been modelled to date. We use microeconomics analysis to conduct a comparison of the gained profit with the three commonly used bundling strategies: no bundling, pure bundling and mixed bundling. The main result shows that the sequential bundling strategy yields higher profits in comparison to all three classic strategies. In particular, for the symmetric cost case, our model provides a useful tool for practitioners such as common online shops.

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While no bundling is not an actual bundling strategy, following Adams and Yellen [1] who compared bundling strategies to the strategy of no bundling, it is common in the literature to refer to no bundling as one of the bundling strategies.

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Without loss of generality and by symmetry—we assume that $c_{X}\le c_{Y \text { }}$.

The second solution of the quadratic equation is negative.

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See also Gayer and Shy [12] for the special case in which $k=1$.

See also Gayer and Shy [12] for the special case in which $k=1$ and $c_{X}=c_{Y}$.

Without loss of generality and by symmetry—we assume that $c_{X}\le c_{Y \text { }}$.

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Title: Online sequential bundling: profit analysis and practice
Authors: Amit Gayer
Avishay Aiche
Eli Gimmon
Publication date: 05-01-2021
Publisher: Springer US
Published in: Electronic Commerce Research / Issue 4/2022
Print ISSN: 1389-5753
Electronic ISSN: 1572-9362
DOI: https://doi.org/10.1007/s10660-020-09452-x

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