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To Bundle or Not to Bundle

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Abstract

Commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only. Bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation, or if the distribution of valuations is very peaked around the mean.

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File URL: http://cowles.econ.yale.edu/P/cd/d14a/d1440.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1440.

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Length: 12 pages
Date of creation: Oct 2003
Date of revision:
Publication status: Published in Rand Journal of Economics (Winter 2006), 37(4): 946-963
Handle: RePEc:cwl:cwldpp:1440

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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Keywords: Monopolistic pricing; Bundling; Peakedness;

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References

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  1. Fang, Hanming & Norman, Peter, 2004. "An Efficiency Rationale for Bundling of Public Goods," Micro Theory Working Papers norman-04-11-21-09-39-13, Microeconomics.ca Website, revised 08 Feb 2005.
  2. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  3. Crawford, Gregory, 2005. "The Discriminatory Incentives to Bundle in the Cable Television Industry," Working paper 303, Regulation2point0.
  4. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 151-68, January.
  5. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February.
  6. Bagnoli, M. & Bergstrom, T., 1989. "Log-Concave Probability And Its Applications," Papers 89-23, Michigan - Center for Research on Economic & Social Theory.
  7. Hanming Fang & Peter Norman, 2003. "To Bundle or Not to Bundle," Cowles Foundation Discussion Papers 1440, Cowles Foundation for Research in Economics, Yale University.
  8. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
  9. An, Mark Yuying, 1995. "Logconcavity versus Logconvexity: A Complete Characterization," Working Papers 95-03, Duke University, Department of Economics.
  10. Rustam Ibragimov, 2005. "Optimal Bundling Strategies For Complements And Substitutes With Heavy-Tailed Valuations," Harvard Institute of Economic Research Working Papers 2088, Harvard - Institute of Economic Research.
  11. Miller, Nolan & Piankov, Nikita & Zeckhauser, Richard, 2001. "When to Haggle," Working Paper Series rwp01-025, Harvard University, John F. Kennedy School of Government.
  12. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  13. Xianjun Geng & Maxwell B. Stinchcombe & Andrew B. Whinston, 2005. "Bundling Information Goods of Decreasing Value," Management Science, INFORMS, vol. 51(4), pages 662-667, April.
  14. Riley, John & Zeckhauser, Richard, 1983. "Optimal Selling Strategies: When to Haggle, When to Hold Firm," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 267-89, May.
  15. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January.
  16. Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
  17. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
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Citations

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Cited by:
  1. Francesconi, Marco & Muthoo, Abhinay, 2010. "Control Rights in Complex Partnerships," The Warwick Economics Research Paper Series (TWERPS) 933, University of Warwick, Department of Economics.
  2. Hanming Fang & Peter Norman, 2008. "Optimal Provision of Multiple Excludable Public Goods," NBER Working Papers 13797, National Bureau of Economic Research, Inc.
  3. Hanming Fang & Peter Norman, 2006. "To bundle or not to bundle," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 946-963, December.
  4. Engel, Christoph, 0. "Competition in a pure world of Internet telephony," Telecommunications Policy, Elsevier, vol. 31(8-9), pages 530-540, September.
  5. Takanori Adachi & Takeshi Ebina & Makoto Hanazono, 2011. "Option Package Bundling," KIER Working Papers 785, Kyoto University, Institute of Economic Research.
  6. Crawford, Gregory S & Yurukoglu, Ali, 2011. "The Welfare Effects of Bundling in Multichannel Television Markets," CEPR Discussion Papers 8370, C.E.P.R. Discussion Papers.
  7. Begoña García-Mariñoso & Xavier Martinez-Giralt & Pau Olivella, 2008. "Bundling in Telecommunications," UFAE and IAE Working Papers 762.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  8. Albert Banal-Estañol & Marco Ottaviani, 2009. "Conglomeration with bankruptcy costs: Separate or joint financing?," Economics Working Papers 1191, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2010.
  9. Sergiu Hart & Noam Nisan, 2012. "Approximate Revenue Maximization with Multiple Items," Discussion Paper Series dp606, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  10. Chenghuan Sean Chu & Phillip Leslie & Alan Sorensen, 2008. "Nearly Optimal Pricing for Multiproduct Firms," NBER Working Papers 13916, National Bureau of Economic Research, Inc.
  11. Rustam Ibragimov, 2004. "Shifting paradigms: on the robustness of economic models to heavy-tailedness assumptions," Econometric Society 2004 Latin American Meetings 105, Econometric Society.

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