Bundling Strategy For A Follower

Abstract

A follower in a market always uses a bundling strategy as a marketing strategy to increase profit and to change its market status.  In this paper, the relationship between the main goods and bundling goods is substitutive, independent, or complementary.  A Stackelberg game is applied to capture the competitive relationship between a leader and a follower.  A follower uses a bundling strategy as a marketing strategy, but a leader does not.  This study reveals that a follower will become a leader when he (or she) sells two products that are low substitution goods.  However, it induces a social welfare to decrease when a follower bundles goods.  This paper illustrates that a bundling action can invert a follower’s market status.  However, the inversion on a follower’s status does not promote the social welfare.