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Pure Components VS Full Mixed Bundling When Stackelberg Pricing

Liu Weihua () and Yu Hui ()
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Yu Hui: School of Economics and Business Administration, Chongqing University, Chongqing400044, China

Journal of Systems Science and Information, 2017, vol. 5, issue 5, 435-445

Abstract: Current literatures assume that a consumer’s willing to pay (WTP) for a bundle is equal to the sum of his or her separate reservation prices for the component goods and concludes that mixed bundling is superior to pure components in a monopoly market. However, full mixed bundling is a discount conduct in order to attract more consumers, and the price of the bundle must be lower than the sum of the prices of two products, which must be considered in a consumers’ WTP for the bundle. Then, if consumers’ reservation prices are heterogeneous and subject to the uniform distribution, we can draw opposite conclusions: Full mixed bundling is disadvantageous to firms when Stackelberg pricing. The profit under full mixed bundling is less than that under pure components.

Keywords: willing to pay; pricing; consumers’ purchasing decisions; firms’ bundling strategy (search for similar items in EconPapers)
Date: 2017
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