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Bundling Sequentially Released Durable Goods

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  • Luís Cabral
  • Gabriel Natividad

Abstract

Suppose two durables are sequentially released and suppose that consumer valuations of these goods are positively correlated. By the time the second good is released, high‐valuation buyers are out of the market for the first good. Therefore, a bundle can be targeted at the low‐valuation consumers without violating the high‐valuation consumers' incentive compatibility constraint. We test the model's predictions on data from retail DVD sales in the 2000's. Consistent with theory, our estimates suggest that mixed bundling increases revenues, especially when the bundle components are similar (which in turn suggests positive correlation of valuations).

Suggested Citation

  • Luís Cabral & Gabriel Natividad, 2022. "Bundling Sequentially Released Durable Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 347-370, June.
    • Handle: RePEc:bla:jindec:v:70:y:2022:i:2:p:347-370
    DOI: 10.1111/joie.12290
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    References listed on IDEAS

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    1. Chenghuan Sean Chu & Phillip Leslie & Alan Sorensen, 2011. "Bundle-Size Pricing as an Approximation to Mixed Bundling," American Economic Review, American Economic Association, vol. 101(1), pages 263-303, February.
    2. Gregory S. Crawford & Ali Yurukoglu, 2012. "The Welfare Effects of Bundling in Multichannel Television Markets," American Economic Review, American Economic Association, vol. 102(2), pages 643-685, April.
    3. Katherine Ho & Justin Ho & Julie Holland Mortimer, 2012. "The Use of Full-Line Forcing Contracts in the Video Rental Industry," American Economic Review, American Economic Association, vol. 102(2), pages 686-719, April.
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