Bundling can signal high quality
James D. Dana
International Journal of Industrial Organization, 2020, vol. 69, issue C
When consumers have noisy information, bundling experience goods can signal high quality in a simple static model. When consumers are partially informed, bundling has a bigger negative impact on the sales of a low-quality firm than on the sales of a firm with two high-quality products. Bundling can also signal high quality by restricting total sales even when consumers are uninformed. However, I argue this is not a likely explanation for bundling because raising prices is always a more profitable way to restrict total sales than bundling.
Keywords: Bundling; Product quality; Signaling; Reputation (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:69:y:2020:i:c:s0167718720300011
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