A theoretical basis for a sponsored location program as a form of joint marketing: a mixed bundling model approach

This study provides the theoretical basis for a 'sponsored location program' - a joint marketing effort designed to benefit all participating parties. We present a mixed bundling model involving two firms: an online game company and an alliance partner. Our model assumes joint sales by the two firms, with generated profit allocated between them. The model implies that under a conventional sponsored location program, changing from separate sales to mixed bundling allows only one, but not both, of the firms to increase profits. But when both firms are free to set prices, changing the retailing mode allows both to increase profits.