Bundling or not bundling: Sequential bundling in e‐commerce distribution channels

Abstract

AbstractSequential bundling is becoming increasingly popular in e‐commerce sales. We study sequential bundling in a distribution channel when the e‐tailer sells both her private‐label products and the manufacturer's products. The e‐tailer decides whether to adopt sequential bundling and selects promotional products. We find that manufacturer sets a low wholesale price under sequential bundling, which is also profitable for the e‐tailer and in some cases can produce a win–win outcome. We also show that the use of sequential bundling by the e‐tailer can promote total channel profits only when the marginal production cost of the manufacturer's product is high.