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Comm 295 - Class 13 Notes

Comm 295 - Class 13 Notes - Comm 296 10.6-10.7 Bundling...

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Comm 296 10.6-10.7 Bundling; Peak-Load Pricing 10.6 BUNDLING Bundle : sell multiple goods or services for a single price - Done for efficiency as it reduces transaction costs - Allows firms to apply nonuniform pricing increase profit by charging different prices to different consumers based on willingness to pay - Two types of bundling: pure bundling and mixed bundling PURE BUNDLING - Only a package deal is offered, cannot buy individual products separately - Whether it pays for a firm to sell a bundle or sell products separately depends on how reservation prices for the components vary across customers - Negatively correlated : when one customer has a higher reservation price for one product has the lower reservation price for the other product - More profitable because firm captures more of consumer’s potential consumer surplus (reservation prices) - Positively correlated : a higher reservation price for one product is associated with a higher reservation price for the other product o
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