A Characterization for Optimal Bundling of Products with Non-Additive Values

TL;DR

This paper characterizes when pure bundling is optimal for a monopolist selling products with non-additive values, linking sales volumes to bundling strategies and discussing implications for non-linear pricing.

Contribution

It provides a novel characterization of optimal bundling conditions based on sales volumes in non-additive valuation settings.

Findings

Pure bundling is optimal if and only if the grand bundle's sales volume exceeds that of any smaller bundle.

The analysis relates to ratio monotonicity results in bundling literature.

Implications for non-linear pricing strategies are discussed.

Abstract

This paper studies optimal bundling of products with non-additive values. Under monotonic preferences and single-peaked profits, I show a monopolist finds pure bundling optimal if and only if the optimal sales volume for the grand bundle is larger than the optimal sales volume for any smaller bundle. I then (i) detail how my analysis relates to "ratio monotonicity" results on bundling; and (ii) describe the implications for non-linear pricing.