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A Characterization for Optimal Bundling of Products with Non-Additive Values

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  • Soheil Ghili

Abstract

This paper studies optimal bundling of products with non-additive values. Under monotonic preferences and single-peaked profits, I show a monopolist finds pure bundling optimal if and only if the optimal sales volume for the grand bundle is larger than the optimal sales volume for any smaller bundle. I then (i) detail how my analysis relates to "ratio monotonicity" results on bundling; and (ii) describe the implications for non-linear pricing.

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  • Soheil Ghili, 2021. "A Characterization for Optimal Bundling of Products with Non-Additive Values," Papers 2101.11532, arXiv.org, revised Apr 2022.
    • Handle: RePEc:arx:papers:2101.11532
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    File URL: http://arxiv.org/pdf/2101.11532
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    References listed on IDEAS

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    1. Pavlov Gregory, 2011. "Optimal Mechanism for Selling Two Goods," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-35, February.
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    3. Armstrong, Mark, 2013. "A more general theory of commodity bundling," Journal of Economic Theory, Elsevier, vol. 148(2), pages 448-472.
    4. Long, John B, Jr, 1984. "Comments on "Gaussian Demand and Commodity Bundling."," The Journal of Business, University of Chicago Press, vol. 57(1), pages 235-246, January.
    5. Menicucci, Domenico & Hurkens, Sjaak & Jeon, Doh-Shin, 2015. "On the optimality of pure bundling for a monopolist," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 33-42.
    6. Stephen W. Salant, 1989. "When is Inducing Self-Selection Suboptimal for a Monopolist?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 391-397.
    7. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages 211-230, January.
    8. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 371-383.
    9. Eric T. Anderson & James D. Dana, Jr., 2009. "When Is Price Discrimination Profitable?," Management Science, INFORMS, vol. 55(6), pages 980-989, June.
    10. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 475-498.
    11. Hanming Fang & Peter Norman, 2006. "To bundle or not to bundle," RAND Journal of Economics, The RAND Corporation, vol. 37(4), pages 946-963, December.
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    Cited by:

    1. Soheil Ghili & Russ Yoon, 2023. "An Empirical Analysis of Optimal Nonlinear Pricing," Papers 2302.11643, arXiv.org, revised Oct 2023.

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