Premium Bundling

William M Cready

Economic Inquiry, 1991, vol. 29, issue 1, 173-79

Abstract: This paper extends W. J. Adams and J. L. Yellen's (1976) well-known mixed-bundling pricing model by examining the case of sellers pricing bundles of goods or services at a premium relative to the prices charged on bundle components; that is, sellers price discriminate by charging more, rather than less, at the margin for bundles relative to components. The analysis demonstrates that sellers can, and perhaps do, employ premium bundling by the skillful use of cents-off coupons, rebates, or direct knowledge of their customers. Copyright 1991 by Oxford University Press.

Date: 1991
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