Game analysis of product-service integration
Abstract: This paper aims at
defining the value creation mechanism and income distribution strategies of
product-service integration in order to promote product-service integration of
a firm.
Design/methodology/approach: This paper conducts researches
quantitatively on the coordination mechanism of product-service integration by
using game theory, and uses the methods of Shapley value and Equal growth rate
to further discuss income distribution strategies of product-service
integration.
Findings: Product-service integration increases the total income of a
firm and the added value of the income decreases as the unit price demand
variation coefficient of products and services increases, while decreases as
the marginal cost of products increases, decreases as the marginal cost of
services increases. Moreover, the findings suggest that both income
distribution strategies of product-service integration based on Shapley value
method and Equal growth rate method can make the product department and service
department of a firm win-win and realize the pareto improvement. The choice of
what kind of distribution strategy to coordinate the actions between
departments depends on the department playing dominant role in the firm.
Generally speaking, for a firm at the center of market, when the product
department is the main contributor to firm income, the service department will
choose the income distribution strategy of product-service integration based on
Shapley value method; when the service department is the main contributor to
firm income, the service department will choose the income distribution
strategy of product-service integration based on Equal growth rate method.
Research limitations/implications: This paper makes some strict
assumptions such as complete information, risk neutral, linear cost function
and so on and the discussion is limited to the simple relationship between
product department and service department.
Practical implications: Product-service integration enables a firm to
improve its total income. A firm should take appropriate income distribution
strategies in order to promote the its product-service integration.
Originality/value: This paper introduces game theory into the research of
product-service integration for the first time and it has reached some valuable
conclusions, which has opened up a new field of study in the product-service
area.
Author: Heping Zhong
Journal Code: jptindustrigg140093
