Optimal Bundling and Pricing under a Monopoly: Contrasting Complements and Substitutes from Independently Valued Products

Published

Journal Article

We develop an analytical model of contingent valuations and address two questions of import to a monopolist: (i) should a given pair of complements or substitutes be sold separately (pure components), together (pure bundling), or both (mixed bundling), and at what prices? (ii) How do optimal bundling and pricing strategies for complements and substitutes differ from those for independently valued products? We find that the combination of marginal cost levels and the degree of complementarity or substitutability determines which of the three bundling strategies is optimal. Complements and substitutes should typically be priced higher than independently valued products.

Full Text

Cited Authors

  • Venkatesh, R; Kamakura, W

Published Date

  • April 1, 2003

Published In

Volume / Issue

  • 76 / 2

Start / End Page

  • 211 - 231

International Standard Serial Number (ISSN)

  • 0021-9398

Digital Object Identifier (DOI)

  • 10.1086/367748

Citation Source

  • Scopus