Bundling and product strategy in channel competition

We investigate the bundling and product strategy in a two‐stage supply chain with the channel competition, and analyze the effect of the bundling strategy on the behavior of supply chain members. In this paper, we consider two situations of channel competitions that are from the external or internal of the supply chain, two types of selling strategies (bundling or unbundling), and two types of product strategies (low or high quality). We propose the game models for different competition situations with the bundling strategy and product‐quality strategy to obtain the optimal decisions for supply chain members. We find that the bundling is the retailer's preferred strategy in two channel competitions; the bundling strategy encourages the competitor (i.e., the new supplier of complementary component) outside the supply chain to provide the low‐quality components, while the product strategy of the channel competitor (i.e., the existing supplier of complementary component) in the supply chain is not affected by the bundling strategy.