Bundling retail products: Models and analysis

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ejor.2005.11.009 Byline: Kevin F. McCardle, Kumar Rajaram, Christopher S. Tang Keywords: Retailing; Product bundling; Pricing; Inventory management; Basic products; Fashion products 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. Author Affiliation: University of California at Los Angeles, Anderson Graduate School of Management, 110 Westwood Plaza, Box 951481, Los Angeles, CA 90095-1481, United States Article History: Received 2 August 2004; Accepted 27 November 2005 Article Note: (footnote) [star] The authors thank Professor Steven Lippman and three anonymous referees for their comments and suggestions.