The Equivalence of Bundling and Advance Sales

8 Pages Posted: 8 Jul 2011

See all articles by Alexei Alexandrov

Alexei Alexandrov

Independent

Özlem Bedre-Defolie

ESMT European School of Management and Technology; University of Bergen, Economics Department; CEPR IO

Multiple version iconThere are 2 versions of this paper

Date Written: July 5, 2011

Abstract

We show that bundling and advance selling are equivalent when the consumers and the seller agree on the probability of each possible state of nature occurring and are risk-neutral, and when the seller can pre-commit to spot prices to be charged after the uncertainty about the state of nature is resolved. The result allows both researchers and practitioners to apply the insights from the vast literature on bundling to advance selling problems. We highlight several insights which are particularly relevant - for example, the interpretation of the correlation of consumer valuations in different possible states of the world.

Keywords: bundling, advance sales, advance purchase discounts

Suggested Citation

Alexandrov, Alexei and Bedre-Defolie, Özlem, The Equivalence of Bundling and Advance Sales (July 5, 2011). Simon School Working Paper No. FR 11-24. Available at SSRN: https://ssrn.com/abstract=1880083 or http://dx.doi.org/10.2139/ssrn.1880083

Alexei Alexandrov (Contact Author)

Independent

No Address Available

Özlem Bedre-Defolie

ESMT European School of Management and Technology ( email )

Schlossplatz 1
10117 Berlin
Germany
+49(0)30212311531 (Phone)

HOME PAGE: http://www.esmt.org

University of Bergen, Economics Department ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

CEPR IO ( email )

London
United Kingdom

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