Bundle-Size Pricing as an Approximation to Mixed Bundling

Chenghuan Sean Chu, Phillip Leslie and Alan Sorensen

American Economic Review, 2011, vol. 101, issue 1, 263-303

Abstract: Multiproduct firms can set separate prices for all possible bundled combinations of its products "mixed bundling"). However, this is impractical for firms with more than a few products, because the number of prices increases exponentially with the number of products. We find that simple pricing strategies are often nearly optimal. Specifically, we show that bundle-size pricing--setting prices that depend only on the size of bundle purchased--tends to be more profitable than offering the individual products priced separately and tends to closely approximate the profits from mixed bundling. (JEL D24, D42, L11, L13, L25)

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (89)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.1.263 (application/pdf)
http://www.aeaweb.org/aer/data/feb2011/20080227_data.zip dataset accompanying article (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:101:y:2011:i:1:p:263-303

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().