Optimal selling strategies for multiple products: probabilistic selling or product bundling

In this study, we examine how a seller should use probabilistic or bundle selling, instead of traditional selling, to penetrate more market segments and price discriminate among consumers, considering various model characteristics. Our findings demonstrate that when all consumers are willing to purchase multiple products, bundle selling predominates when the sum of the production costs is low since a lower bundle price is given to attract the consumers to buy the bundle product. However, when all consumers desire to buy only one product, probabilistic selling becomes another market segmentation strategy for the seller. Lower production costs allow the seller to maintain a reasonable profit margin when offering the probabilistic product. That said, with low production costs, the seller can adopt different selling strategies and offer either bundle or probabilistic product to those who may not make a purchase under traditional selling. Finally we consider a general case that includes the aforementioned two types of consumers. Our results guide the decision makers to carefully determine the optimal selling strategies with consideration of the production costs, degree of horizontal differentiation, and whether consumers prefer buying one or multiple products.