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The Simple Economics of Optimal Bundling

Frank Yang
Dec 2022
摘要
We study optimal bundling when consumers differ in one dimension. Weintroduce a partial order on the set of bundles defined by (i) set inclusionand (ii) sales volumes (if sold alone and priced optimally). We show that ifthe undominated bundles with respect to this partial order are nested, thennested bundling (tiered pricing) is optimal. We characterize which nested menuis optimal: Selling a given menu of nested bundles is optimal if a smallerbundle in (out of) the menu sells more (less) than a bigger bundle in the menu.We apply these insights to connect optimal bundling and quality design to priceelasticities and cost structures: (i) when price elasticities are quasi-convexon the set of bundles, nested bundling is always optimal and the optimalmechanism simply creates nests in the order of price elasticities; (ii) whenconsumers' preferences are multiplicative, the optimal quality design can becharacterized by the lower monotone envelope of the average cost curve.
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