The Benefits of Bundling Strategies

Abstract

This paper analyzes the effects of three bundling strategies - unbundling, mixed bundling, and pure bundling - on profit and sales, using a simulation study based on a model by Schmalensee (1984). The analysis shows under what conditions which strategy is the most profitable, how large the profit and sales differentials are for each strategy, and what characteristics the corresponding price structures have. Based on our results, we explain the differences observed in the study and derive a set of implications for practical price structuring.

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