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| Author: | Evans, D.S. Salinger, M.A. |
| Title: | The role of cost in determining when firms offer bundles |
| Journal: | Journal of Industrial Economics
2008 : MAR, VOL 56:1 p. 143-168 |
| Index terms: | bundling fixed costs products marginal costing demand customers |
| Language: | eng |
| Abstract: | This paper models competitive bundling and tying, allowing for marginal cost savings from bundling, fixed costs of product offerings, and variation in customer preferences. Pure bundling can arise either because few people demand only one component or because, with high fixed costs, a single product efficiently satisfies customers with diverse tastes. The paper is concluded by analyzing empirically the bundling of pain relievers with decongestants. The discount for the bundled product is large. It is argued that the model which is presented in the paper provides a simpler, more compelling explanation for the size of the discount than the demand-centered approach to bundling by a monopolist. |
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