Optimal Bundling: Characterization, Interpretation, and Implications for Empirical Work

Soheil Ghili ()
Additional contact information
Soheil Ghili: Cowles Foundation & School of Management, Yale University, https://som.yale.edu/faculty/soheil-ghili

No 2273, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper studies pure bundling. Specifically, I show that, under some conditions, a firm optimally chooses to sell only the full bundle of a given set of products if and only if the optimal sales volume of the full bundle is weakly larger than the optimal sales volume for any smaller bundle. I argue that this characterization can be interpreted as follows: pure bundling is sub-optimal when there is considerable variation across consumers in how complementary they find disjoint sub-bundles, and/or when this variation correlates negatively with their price sensitivity. I then demonstrate{using simulated data and a random-coefficient discrete choice demand model{that capturing these two variations is indeed crucial for model selection in the empirical analysis of bundling decisions.

Pages: 28 pages
Date: 2021-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d22/d2219.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:2273

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().