CFDP 2273

A Characterization for Optimal Bundling of Products with Inter-dependent Values

Publication Date: February 2021

Update Date: February 2021

Pages: 28

Abstract: 

This paper studies optimal bundling of products with inter-dependent values. I show that, under some conditions, a firm optimally chooses to sell only the full bundle of a given set of products if and only if the optimal sales volume of the full bundle is larger than the optimal sales volume for any smaller bundle. I then provide an interpretation of this characterization based on (i) the magnitude of the variation across consumers in how complementary they find different products, and (ii) how this variation correlates with price sensitivity.

Note: 

Original title was “Optimal Bundling: Characterization, Interpretation, and Implications for Empirical Work”