PRICING FREE AND BUNDLED PRODUCTS OF SMARTPHONE MANUFACTURERS AND TELECOM SERVICE OPERATORS IN COOPERATION AND NON-COOPERATION MODES: A GAME THEORETIC

Nowadays, with the increasing importance of communication, competition in the smart phone supply chain is greatly increased with the arrival of various companies. Companies at all levels of the smart phone supply chain compete and coordinate with each other for market share and prot. These companies should be able to make right decisions in the competitive marketplace and even collaborate with some other members of the chain to preserve their survival in the market. Telecom ser vice operator and smart phone manufacturer are twokey members of smart phone supply chain. The importance of channel selection and pricing to the competitiveness of a supply chain has been recognized in practice and literature for some time. In this paper, we examine the impact of power structures on the decision of pricing and channel selection between a free channel and a bundled channel. This paper investigates the smart phone supply chain that consists of two smart phone manufacturers and two telecom service operators. Based on game theory models, the manufacturers' optimal retail pricing policies in free and bundled channels and the telecom service operators' optimal subsidy policies in a bundledchannelarederivedunderdierentpowerstructures. The results show that there exist unique optimal retail prices for free and bundled products of the smart phone manufacturer in the free channel and bundled channel with dierent power structures. There are also unique optimal subsidies for the telecom service operator in bundled channels with dierent power structures. Our ndings also show that dierent power structures have signicant impact on the prot of individual rms and the entire smart phone supply chain's protability. Finally, a numerical example will be provided to illustrate the eectiveness of the proposed method, sensitivity analysis and the eect of price changes in telecom operatorservices. The results showthat cooperationbetweenasmartphonemanufacturerandatelecomservice operator has high impact on prot of each player.