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The smart phone industry has unique supply chain relationships. Companies at all levels of the supply chain compete and coordinate with each other for market share and profit. This paper examines the impact of power structures on the decision of pricing and channel selection between a free channel and a bundled channel. We investigate the smart phone supply chain that consists of a handset manufacturer and a telecom service operator. Based on game theory models, the manufacturer׳s optimal retail pricing policies in free and bundled channels and the telecom service operator׳s optimal subsidy policies in a bundled channel are derived under different power structures. It is demonstrated that the firm that has higher channel power will gain more profit, and the smart phone supply chain׳s profit in a Vertical Nash (VN) power structure is higher than that in Telecom Service Operator-Stackelberg (TS) and …