Abstract

http://ssrn.com/abstract=1765997
 
 

References (23)



 


 



Threshold-Based Mixed Bundling


Michael Bar


San Francisco State University

Kirill Chernomaz


San Francisco State University - Department of Economics

Diego Escobari


The University of Texas - Pan American; Texas A&M University - Department of Economics

February 20, 2011


Abstract:     
This article explores the practice of bundling a free unit of good y (drink) with a threshold purchase of good x (food). Allowing for heterogeneity in consumer drink preferences we characterize the conditions under which the practice is strictly more profitable than linear pricing. An increase in food sales is the source of higher profits. Selection issues reduce profitable opportunities in heterogeneous populations of consumers relative to homogeneous populations. In some cases, an increase in profit from using the practice can be higher when consumers would not otherwise buy the drink. When heterogeneity is further extended to consumer food preferences similar results emerge from numerical calculations. The practice can be Pareto-improving if the seller has limited control over prices.

Number of Pages in PDF File: 33

Keywords: Mixed bundling, Multi-product nonlinear pricing, Quantity discounts, Threshold

JEL Classification: D4, L1

working papers series





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Date posted: February 22, 2011 ; Last revised: June 8, 2011

Suggested Citation

Bar, Michael and Chernomaz, Kirill and Escobari, Diego, Threshold-Based Mixed Bundling (February 20, 2011). Available at SSRN: http://ssrn.com/abstract=1765997 or http://dx.doi.org/10.2139/ssrn.1765997

Contact Information

Michael Bar
San Francisco State University ( email )
1600 Holloway Avenue
San Francisco, CA 94132
United States
HOME PAGE: http://bss.sfsu.edu/mbar/index.htm
Kirill Chernomaz (Contact Author)
San Francisco State University - Department of Economics ( email )
1600 Holloway Avenue
San Francisco, CA 94132
United States
(415) 405-2699 (Phone)
HOME PAGE: http://online.sfsu.edu/~kirillch/
Diego Escobari
The University of Texas - Pan American ( email )
1201 W. University Drive
Edinburg, TX 78539-2999
United States
HOME PAGE: http://faculty.utpa.edu/escobarida
Texas A&M University (TAMU) - Department of Economics ( email )
5201 University Blvd.
College Station, TX 77843-4228
United States
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