The role of complementarity of goods in a mixed bundling strategy

  1. Carmen D. Álvarez Albelo 1
  1. 1 Universidad de La Laguna
    info

    Universidad de La Laguna

    San Cristobal de La Laguna, España

    ROR https://ror.org/01r9z8p25

Journal:
Economics and Business Letters

ISSN: 2254-4380

Year of publication: 2020

Volume: 9

Issue: 1

Pages: 31-40

Type: Article

DOI: 10.17811/EBL.9.1.2020.31-40 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

Abstract

This paper studies optimal pricing when a monopolist firm produces two complementary goods and may undertake a bundling strategy. To do so, a modified version of Yan and Bandyopadhyay’s (2011) framework is used, in which the efficacy of the bundling strategy depends positively on the degree of complementarity of goods. Two main results are obtained. First, mixed bundling turns out to be the optimal strategy for the firm, since it yields higher profits than pure unbundling and pure bundling. Second, sales and profits from the bundling (unbundling) strategy increase (decrease) as the products become more complementary, which entails an empirically sensible behavior.

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