Bundling

Question 1

What is Bundling?

Answer 1

Often products are bundled together in a package, for example, supermarket “meal for 2” deals, main course and dessert in restaurants, channels for Sky.

Question 2

What is the reason for bundling?

Answer 2

Make money by exploiting different relative valuations.

Question 3

Pure Bundling

Answer 3

Occurs when the firm only allows the bundle to be purchased.
Example
Cinema

Question 4

MB better than others?

Answer 4

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.

Question 5

Bundle Sized Pricing

Answer 5

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.