Bundling Complements

Weijie Zhong

Papers from arXiv.org

Abstract: I study a monopolist selling goods to a buyer with combinatorial preferences. The seller's dual is a minimum-cost flow of the differential virtual value. I characterize two reductions: when the differential virtual value is represented on types, and when this representation is independent of the preference. The distribution then determines the \emph{required directions}, along which the dual transports mass, and the preference the \emph{covered directions} of each bundle; optimality is full coverage. Comparative statics in the preference use this separation: a premium on bundles containing a core of goods models complementarity and widens their covered directions. Two thresholds describe the optimum: above a lower threshold the grand bundle must be offered; above an upper threshold a \emph{core-peripheral} menu --- a bundled core with optional add-ons not sold standalone --- is optimal. The upper threshold is finite if and only if the menu is \emph{inclusive}: it excludes no near-top buyer.

Date: 2026-07, Revised 2026-10
New Economics Papers: this item is included in nep-des and nep-mic
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