Joint Decision of Pricing and Cross-Ruff Coupon Value under Substitute (Complement) Demand
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Abstract
This paper focuses on the optimal decisions of pricing and cross-ruff coupon face value for two linked brands products. We develop the profit maximization models for two kinds of coupons: in-pack cross-ruff coupon and on-pack cross-ruff coupon under substitute (complement) demand, and conclude that 1) the coupon values, prices and profit under substitute demand are higher than under complement demand or independent demand; 2) the profit under on-pack coupon mode are higher than in-pack coupon mode. According to the results, we provide the managerial insights for choosing the linked brands. Through numerical example, we observe that the coupon values, target brand prices and carrier brand prices for on-pack cross-ruff coupon are more sensitive than in-pack cross-ruff coupon to reference price.
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