Title: Bundling and pricing of product with after-sale services

Authors: S. Kameshwaran, N. Viswanadham, Vijay Desai

Addresses: Centre for Global Logistics and Manufacturing Strategies, Indian School of Business, Gachibowli, Hyderabad 500032, India. ' Centre for Global Logistics and Manufacturing Strategies, Indian School of Business, Gachibowli, Hyderabad 500032, India. ' Department of Industrial Engineering and Operations Research, Columbia University, NY 10027 6699, USA.

Abstract: Bundling is the sale of two or more products in combination as a package. In this paper, we consider the bundling and pricing of a complex durable product with the after-sales repair and maintenance services. The product and service are two different, but related markets for this scenario. The problem of bundling and pricing are considered for two product market structures: monopoly and duopoly. In the monopoly case, the decision framework is an optimisation problem, whereas for the duopoly, the strategic interactions of the two firms are modelled as a two stage non-cooperative game. These decision frameworks enable the manufacturing firms to decide upon the product-service bundling and pricing.

Keywords: manufacturing service integration; product bundling; non-cooperative game; sub-game perfect equilibrium; product pricing; after-sale services; complex products; durable products; repair; maintenance; monopoly; duopoly.

DOI: 10.1504/IJOR.2009.026245

International Journal of Operational Research, 2009 Vol.6 No.1, pp.92 - 109

Published online: 30 May 2009 *

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