Optimal Bundling Strategies For Complements And Substitutes With Heavy-Tailed Valuations
We develop a framework that allows one to model the optimal bundling problem of a multiproduct monopolist providing interrelated goods with an arbitrary degree of complementarity or substitutability. Characterizations of optimal bundling strategies are derived for the seller in the case of long-tailed valuations and tastes for the products. We show, in particular, that if goods provided in a Vickrey auction or any other revenue equivalent auction are substitutes and bidders' tastes for the objects are not extremely heavy-tailed, then the monopolist prefers separate provision of the products. However, if the goods are complements and consumers' tastes are extremely thick- tailed, then the seller prefers providing the products on a single auction. We also present results on consumers' preferences over bundled auctions in the case when their valuations exhibit heavy-tailedness. In addition, we obtain characterizations of optimal bundling strategies for a monopolist who provides complements or substitutes for profit maximizing prices to buyers with long-tailed tastes.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: 200 Littauer Center, Cambridge, MA 02138|
Web page: http://www.economics.harvard.edu/journals/hier
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:harver:2088. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.