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Intertemporal Mixed Bundling and Buying Frenzies

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  • Patrick DeGraba
  • Rafi Mohammed

Abstract

By initially selling goods only in bundles and subsequently selling unsold units individually, a multiproduct seller can create a buying frenzy in which his profit is higher than it would be if he sold all units individually at their market clearing prices. In this frenzy, high-valuation customers buy a bundle because they expect quantity rationing when units are sold individually. Their purchases reduce the quantity to be sold individually, causing the shortages that result in rationing. The bundle's price exceeds the sum of the individual prices, a fact observed in markets for rock concert tickets.

Suggested Citation

  • Patrick DeGraba & Rafi Mohammed, 1999. "Intertemporal Mixed Bundling and Buying Frenzies," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 694-718, Winter.
  • Handle: RePEc:rje:randje:v:30:y:1999:i:winter:p:694-718
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    Cited by:

    1. Henk Folmer & Auke Leen, 2013. "Why do successful restaurants not raise their prices?," Letters in Spatial and Resource Sciences, Springer, vol. 6(2), pages 81-90, July.
    2. Jones, Steven L. & Yeoman, John C., 2009. "The promoter's role in ticket pricing: Implications of real options for optimal posted prices and rationing," Journal of Business Research, Elsevier, vol. 62(11), pages 1187-1192, November.
    3. Robert Innes & Stephen F. Hamilton, 2009. "Vertical restraints and horizontal control," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 120-143.

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