Implications of stochastic demand and manufacturers' operational mode on retailer's mixed bundling strategy and its complexity analysis

In this paper, we consider a supply chain consisting of two manufacturers and one retailer producing and retailing complementary products facing stochastic demand. We focus on the retailer's bundling strategy and investigate the impact of the stochastic demand and manufacturers' decisions on the bundling strategy. We find that the manufacturers will make cooperative game to maximize their profits. With manufacturers' cooperative pricing strategy, the retailer will adopt bundling strategy facing a low level uncertain demand. Under severe uncertainty, the retailer will adopt no-bundling strategy to obtain more profits. We work out the critical condition which determines the retailer's retail strategy. We also analyze the stability of the dynamic game system in which the retailer adopts bundling and no-bundling strategy and find that the system in which the retailer adopts no -bundling strategy has a better performance on keeping stability, although the market is more uncertain. Finally, we provide managerial insights for the manufacturers to keep system stable and control the unstable system. (C) 2017 Elsevier Inc. All rights reserved.