Nested Bundling

Frank Yang

American Economic Review, 2025, vol. 115, issue 9, 2970-3013

Abstract: A nested bundling strategy creates menus in which more expensive bundles include all the goods of less expensive ones. We study when nested bundling is optimal and determine which nested menu is optimal, when consumers differ in one dimension. We define a partial order on bundles by (i) set inclusion and (ii) sales quantity when sold alone. We show that, under quasi-concavity assumptions, if the undominated bundles with respect to this partial order are nested, then nested bundling is optimal. We present an iterative algorithm that identifies the minimal optimal menu consisting of a subset of the undominated bundles.

JEL-codes: D11 D21 D42 D82 M31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/aer.20230455

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