Sequential introduction of quality-differentiated add-ons in advance bundling

Advance bundling is a hybrid strategy of advance selling and bundling strategy. The firm bundles the base product with one add-on in advance period and then sells another quality-differentiated add-on individually in spot period. This paper establishes an analytical model to solve the optimal advance price and the optimal spot price over two periods when consumers are heterogeneous. The experimental results show that when the number of high-value segment is large, the high advance price and spot price is optimal, while the low advance price and spot price is optimal when the number of low-value segment is large.