To Bundle or Not to Bundle: Determinants of the Profitability of Multi-Item Auctions

Journal of Marketing, Vol. 74, No. 4, pp. 110-124, 2010

University of Alberta School of Business Research Paper No. 2013-750

15 Pages Posted: 23 Jul 2010 Last revised: 19 Nov 2017

See all articles by Peter T. L. Popkowski Leszczyc

Peter T. L. Popkowski Leszczyc

University of Queensland - Business School

Gerald Häubl

University of Alberta - Department of Marketing, Business Economics & Law

Date Written: July 22, 2010

Abstract

Bundling, a strategy of selling multiple component products as a package for a single price, is widely practiced in today’s marketplace. This article focuses on bundling in auctions, and it investigates under what conditions it is more profitable to auction two items as a bundle vs. separately. We introduce a conceptual model that identifies determinants of the revenue of a single bundle auction relative to separate component auctions – the degree of complementarity between items, the amount of heterogeneity in bidders’ valuations, whether the components are auctioned both as a bundle and separately, and the outside availability of the individual items. The hypotheses encapsulated in this model are tested in three field experiments. The empirical evidence shows that, in the absence of complementarity, a bundle auction is less profitable than separate component auctions. However, even for relatively low levels of complementarity, bundling results in higher revenue than separate auctions, and this revenue-enhancing effect of bundling in auctions is greater for services than for tangible products. This even occurs when the outside availability of the component items is high. Finally, our results help identify the specific conditions under which mixed bundling, pure bundling, or pure component strategies maximize seller revenue from auctions.

Keywords: Auctions, Bundling, Complementarity

JEL Classification: C93, D12, M39

Suggested Citation

Popkowski Leszczyc, Peter T. L. and Häubl, Gerald, To Bundle or Not to Bundle: Determinants of the Profitability of Multi-Item Auctions (July 22, 2010). Journal of Marketing, Vol. 74, No. 4, pp. 110-124, 2010; University of Alberta School of Business Research Paper No. 2013-750. Available at SSRN: https://ssrn.com/abstract=1647293

Peter T. L. Popkowski Leszczyc (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Gerald Häubl

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

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