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Bundling Sequentially Released Durable Goods

Luís Cabral and Gabriel Natividad ()

Journal of Industrial Economics, 2022, vol. 70, issue 2, 347-370

Abstract: Suppose two durables are sequentially released and suppose that consumer valuations of these goods are positively correlated. By the time the second good is released, high‐valuation buyers are out of the market for the first good. Therefore, a bundle can be targeted at the low‐valuation consumers without violating the high‐valuation consumers' incentive compatibility constraint. We test the model's predictions on data from retail DVD sales in the 2000's. Consistent with theory, our estimates suggest that mixed bundling increases revenues, especially when the bundle components are similar (which in turn suggests positive correlation of valuations).

Date: 2022
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Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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