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Nearly Optimal Pricing for Multiproduct Firms

  • Chenghuan Sean Chu
  • Phillip Leslie
  • Alan Sorensen


    (Graduate School of Business Stanford University)

We examine pricing strategies for a multiproduct monopolist. We show that simple quantity discounting strategies are almost as profitable as fully optimal bundling. We investigate this in an empirical example, using data from a theater company

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 830.

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Date of creation: 03 Dec 2006
Date of revision:
Handle: RePEc:red:sed006:830
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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  1. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages S211-30, January.
  2. Kamel Jedidi & Sharan Jagpal & Puneet Manchanda, 2003. "Measuring Heterogeneous Reservation Prices for Product Bundles," Marketing Science, INFORMS, vol. 22(1), pages 107-130, July.
  3. Fang,H. & Norman,P., 2003. "To bundle or not to bundle," Working papers 18, Wisconsin Madison - Social Systems.
  4. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
  5. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  6. Phillip Leslie, 2004. "Price Discrimination in Broadway Theater," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 520-541, Autumn.
  7. Vassilis A. Hajivassiliou & Daniel L. McFadden & Paul Ruud, 1993. "Simulation of Multivariate Normal Rectangle Probabilities and their Derivatives: Theoretical and Computational Results," Working Papers _024, Yale University.
  8. Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science.
  9. Allenby, Greg M. & Rossi, Peter E., 1998. "Marketing models of consumer heterogeneity," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 57-78, November.
  10. Wesley Hartmann & V. Viard, 2008. "Do frequency reward programs create switching costs? A dynamic structural analysis of demand in a reward program," Quantitative Marketing and Economics, Springer, vol. 6(2), pages 109-137, June.
  11. Jean-Pierre Dubé, 2004. "Multiple Discreteness and Product Differentiation: Demand for Carbonated Soft Drinks," Marketing Science, INFORMS, vol. 23(1), pages 66-81, September.
  12. Alan Sorensen & Phillip Leslie, 2007. "Ticket Resale," 2007 Meeting Papers 527, Society for Economic Dynamics.
  13. Hendel, Igal, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 423-46, April.
  14. Levinsohn, James & Berry, Steven & Pakes, Ariel, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Scholarly Articles 3436404, Harvard University Department of Economics.
  15. 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.
  16. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  18. Manelli, Alejandro M. & Vincent, Daniel R., 2006. "Bundling as an optimal selling mechanism for a multiple-good monopolist," Journal of Economic Theory, Elsevier, vol. 127(1), pages 1-35, March.
  19. Malueg, David A. & Snyder, Christopher M., 2006. "Bounding the relative profitability of price discrimination," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 995-1011, September.
  20. 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.
  21. 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.
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