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Optimal bundle pricing under correlated valuations

Bo Chen and Debing Ni

International Journal of Industrial Organization, 2017, vol. 52, issue C, 248-281

Abstract: We study optimal pricing issues for a monopolist selling two indivisible goods to a continuum of consumers with correlated private valuations over the goods, where the (positive or negative) correlation is modeled using copulas in the Fréchet family. We derive explicit optimal pricing schemes and comparative statics results for various environments in our setting. The optimal pricing schemes can take several forms, including pure bundling, partial mixed bundling, and mixed bundling, depending jointly on the degrees of asymmetry and correlation of the consumers’ valuations. The explicit optimal pricing schemes also enable us to investigate whether and how the monopolist’s profit can be further improved via random assignments.

Keywords: Bundling; Correlated valuations; Monopoly pricing; Price discrimination; Random mechanism (search for similar items in EconPapers)
JEL-codes: D11 D42 D82 L12 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.ijindorg.2017.02.002

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International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

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Handle: RePEc:eee:indorg:v:52:y:2017:i:c:p:248-281