Option Package Bundling
This paper analyzes the optimality of package bundling by focusing on the ?main and accessory?relationship between two goods. In particular, we consider option package bundling in which an optional good is valuable only if it is consumed together with a certain (nonoptional) base good. We develop a model of option package bundling for a monopolist in which buyers?valuations are independently and uniformly distributed. We also allow inter-relationship between valuations by assuming that the reservation value of the bundle can be greater or less than the sum of the innate value of both goods. Our analysis observes that mixed bundling, in which the base good is sold with or without the optional good, yields a higher pro?t than pure bundling if and only if the range of the optional good valuation exceeds a threshold value. We then conduct a welfare analysis of the bundling choice. The result is surprising: pure bundling is always desirable from the social welfare viewpoint when a monopolist chooses mixed bundling.
|Date of creation:||Oct 2011|
|Contact details of provider:|| Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501|
Web page: http://www.kier.kyoto-u.ac.jp/eng/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Thanassoulis, 2007.
"Competitive Mixed Bundling and Consumer Surplus,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 16(2), pages 437-467, 06.
- John Thanassoulis, 2006. "Competitive Mixed Bundling and Consumer Surplus," Economics Series Working Papers 263, University of Oxford, Department of Economics.
- Hanming Fang & Peter Norman, 2006. "To bundle or not to bundle," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 946-963, December.
- Fang,H. & Norman,P., 2003. "To bundle or not to bundle," Working papers 18, Wisconsin Madison - Social Systems.
- Hanming Fang & Peter Norman, 2003. "To Bundle or Not to Bundle," Cowles Foundation Discussion Papers 1440, Cowles Foundation for Research in Economics, Yale University.
- Fang, Hanming & Norman, Peter, 2005. "To Bundle or Not to Bundle," Microeconomics.ca working papers norman-05-06-10-08-19-02, Vancouver School of Economics, revised 10 Jun 2005.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, February.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, February.
- Doh-Shin Jeon & Domenico Menicucci, 2012. "Bundling and Competition for Slots," American Economic Review, American Economic Association, vol. 102(5), pages 1957-1985, August.
- Doh-Shin Jeon & Domenico Menicucci, 2007. "Bundling and Competition for Slots," Working Papers 07-15, NET Institute, revised Sep 2007.
- Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, November.
- 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.
- 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.
- Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 585-637.
- Leonard K. Cheng & Jae Nahm, 2007. "Product boundary, vertical competition, and the double mark-upproblem," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 447-466, 06.
- R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
- David S. Evans & Albert L. Nichols & Richard Schmalensee, 2005. "U.S. v. Microsoft: Did Consumers Win?," NBER Working Papers 11727, National Bureau of Economic Research, Inc.
- Mark Armstrong, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 151-168.
- Armstrong, M., 1996. "Price discrimination by a many-product firm," Discussion Paper Series In Economics And Econometrics 9628, Economics Division, School of Social Sciences, University of Southampton.
- Salinger, Michael A, 1995. "A Graphical Analysis of Bundling," The Journal of Business, University of Chicago Press, vol. 68(1), pages 85-98, January.
- John C. Eckalbar, 2010. "Closed-Form Solutions to Bundling Problems," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 513-544, 06.
- Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
- Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science.
- William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
- Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 159-187.
- repec:rje:randje:v:37:y:2006:i:4:p:946-963 is not listed on IDEAS
- Gregory Crawford, 2008. "The discriminatory incentives to bundle in the cable television industry," Quantitative Marketing and Economics (QME), Springer, vol. 6(1), pages 41-78, March.
- Takanori Adachi & Takeshi Ebina, 2012. "An Economic Analysis of Add‐on Discounts," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 33, pages 99-107, 03. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kyo:wpaper:785. 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: (Ryo Okui)
If references are entirely missing, you can add them using this form.