Created Unequal: Bundling with Crowdsourced Products

Posted: 12 Mar 2019

See all articles by Ming Hu

Ming Hu

University of Toronto - Rotman School of Management

Lu Wang

Shanghai University of Finance and Economics - College of Business

Date Written: February 20, 2019

Abstract

As consumer buying habits are trending toward more simple and hassle-free experiences, more and more companies are jumping into the innovative business model of subscription services. Subscription providers such as Spotify, Netflix and OneGo (an all-you-can-fly subscription service provider) crowdsource products/services from many vendors and bundle them for the price of one. The collected subscription fees for the bundle then are allocated according to the realized contributions by each crowdsourced product. However, this allocation scheme may create incentive incompatibility for vendors, given their options of not joining the bundle. We examine the incentive compatibility of different parties under various bundling strategies. In particular, we show that the popular product vendors prefer the pure bundling subscription, while the niche product vendors tend to favor the partial mixed bundling with their own product sold separately in addition to the bundle.

Keywords: Subscription, Crowdsourced Products

Suggested Citation

Hu, Ming and Wang, Lu, Created Unequal: Bundling with Crowdsourced Products (February 20, 2019). Available at SSRN: https://ssrn.com/abstract=3338314

Ming Hu (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Lu Wang

Shanghai University of Finance and Economics - College of Business ( email )

777 Guoding Road
Shanghai, 200433
China

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