Online pricing with bundling and coupon discounts

A nonlinear mixed-integer programming model is proposed to determine the most appropriate bundle discount and instant coupon so as to maximise e-tailer’s profit and investigates the robustness of the proposed method by examining how uncertainties in system parameters affect performance.

Abstract

We propose an online pricing strategy by utilising product bundling and coupon discounts. Given customer’s purchase behaviour and preference for bundling and coupon, we propose a nonlinear mixed-integer programming model to determine the most appropriate bundle discount and instant coupon so as to maximise e-tailer’s profit. A fast heuristic algorithm is designed to implement the proposed model online in real time. We investigate the robustness of the proposed method by examining how uncertainties in system parameters affect performance. Through collaborative optimisation, we offer important insights and managerial implications, and show how marketers can attract more purchase and maximise profit by properly integrating marketing tools such as bundling and coupon.