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Model for Studying Commodity Bundling with a Focus on Consumer Preference

Author

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  • Jungwoo Shin
  • Chang Seob Kimi
  • Jongsu Lee

    (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)

Abstract

This research complements demand side analysis of previous commodity bundling studies in which oligopoly models and game theory were used. According to demand side analysis, this study proposes the use of discrete-continuous consumption behavior applied to a commodity bundling model that incorporates consumer heterogeneity to analyze the effect of bundling strategies. Previous researchers have assumed a simple consumer utility model such that the heterogeneity of consumer preference is not reflected. Most analyzed effects of commodity bundling by focusing on firm behavior. However, to measure the results of the competition of bundling strategy, analysis of commodity bundling that is based on consumer preference is useful. Unlike previous research, this study proposes a model that directly analyzes consumer behavior for commodity bundling. This study conducted empirical analysis, obtained from data on information communication technology (hereafter, ICT) service subscription and usage in Korea, to validate the proposed model. The empirical results show that the proposed model is useful to analyze the effects of bundling for various services and products.

Suggested Citation

  • Jungwoo Shin & Chang Seob Kimi & Jongsu Lee, 2009. "Model for Studying Commodity Bundling with a Focus on Consumer Preference," TEMEP Discussion Papers 200934, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
    • Handle: RePEc:snv:dp2009:200934
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    References listed on IDEAS

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    Cited by:

    1. Castro, Marisol & Bhat, Chandra R. & Pendyala, Ram M. & Jara-Díaz, Sergio R., 2012. "Accommodating multiple constraints in the multiple discrete–continuous extreme value (MDCEV) choice model," Transportation Research Part B: Methodological, Elsevier, vol. 46(6), pages 729-743.

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    More about this item

    Keywords

    Bayesian estimation; Commodity bundling; Consumer heterogeneity; Game theory; Mixed multiple discrete-continuous extreme value model; Oligopoly model;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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