What is Bundling?
Often products are bundled together in a package, for example, supermarket “meal for 2” deals, main course and dessert in restaurants, channels for Sky.
What is the reason for bundling?
Make money by exploiting different relative valuations.
Occurs when the firm only allows the bundle to be purchased.
MB better than others?
MB always dominated PB almost aways.
- Marginal cost caveat - high marginal costs make bundling less likely.
b/c it means on avg. they are selling more products and thus incurring high costs.
MB becomes very complex as a number of products increases.
For a firm with K product it means 2^k 1.
Bundle Sized Pricing
One price for one product, another price for any 2 products, another price for any 3 products etc.
For example, in a restaurant, you can have any main course + a dessert which equals a certain price.