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Free or bundled: Channel selection decisions under different power structures

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  • Chen, Xu
  • Wang, Xiaojun

Abstract

The smart phone industry has unique supply chain relationships. Companies at all levels of the supply chain compete and coordinate with each other for market share and profit. This paper examines the impact of power structures on the decision of pricing and channel selection between a free channel and a bundled channel. We investigate the smart phone supply chain that consists of a handset manufacturer and a telecom service operator. Based on game theory models, the manufacturer׳s optimal retail pricing policies in free and bundled channels and the telecom service operator׳s optimal subsidy policies in a bundled channel are derived under different power structures. It is demonstrated that the firm that has higher channel power will gain more profit, and the smart phone supply chain׳s profit in a Vertical Nash (VN) power structure is higher than that in Telecom Service Operator-Stackelberg (TS) and Manufacturer-Stackelberg (MS) power structures. It is also shown that the smart phone supply chain will choose a bundled channel in TS and MS power structures under certain conditions and will select a free channel in a VN power structure.

Suggested Citation

  • Chen, Xu & Wang, Xiaojun, 2015. "Free or bundled: Channel selection decisions under different power structures," Omega, Elsevier, vol. 53(C), pages 11-20.
  • Handle: RePEc:eee:jomega:v:53:y:2015:i:c:p:11-20
    DOI: 10.1016/j.omega.2014.11.008
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    1. repec:gam:jsusta:v:9:y:2017:i:11:p:2113-:d:119399 is not listed on IDEAS
    2. Luo, Zheng & Chen, Xu & Chen, Jing & Wang, Xiaojun, 2017. "Optimal pricing policies for differentiated brands under different supply chain power structures," European Journal of Operational Research, Elsevier, vol. 259(2), pages 437-451.
    3. repec:taf:tprsxx:v:55:y:2017:i:12:p:3510-3527 is not listed on IDEAS
    4. repec:gam:jsusta:v:9:y:2017:i:6:p:961-:d:100655 is not listed on IDEAS
    5. Chen, Xu & Wang, Xiaojun, 2016. "Effects of carbon emission reduction policies on transportation mode selections with stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 90(C), pages 196-205.
    6. repec:taf:tprsxx:v:55:y:2017:i:17:p:5127-5141 is not listed on IDEAS
    7. Chen, Xu & Wang, Xiaojun & Chan, Hing Kai, 2016. "Channel coordination through subsidy contract design in the mobile phone industry," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 97-104.
    8. repec:spr:annopr:v:268:y:2018:i:1:d:10.1007_s10479-016-2275-4 is not listed on IDEAS
    9. repec:eee:proeco:v:193:y:2017:i:c:p:422-436 is not listed on IDEAS
    10. repec:spr:annopr:v:257:y:2017:i:1:d:10.1007_s10479-015-1964-8 is not listed on IDEAS
    11. Chen, Xu & Wang, Xiaojun & Chan, Hing Kai, 2017. "Manufacturer and retailer coordination for environmental and economic competitiveness: A power perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 97(C), pages 268-281.
    12. repec:eee:proeco:v:193:y:2017:i:c:p:183-192 is not listed on IDEAS
    13. repec:gam:jeners:v:11:y:2018:i:4:p:983-:d:141936 is not listed on IDEAS
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