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PROFITABILITY OF PRODUCT BUNDLING *
Author(s) -
Chen Yongmin,
Riordan Michael H.
Publication year - 2013
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2012.00725.x
Subject(s) - profitability index , monopoly , profit (economics) , microeconomics , economics , product (mathematics) , econometrics , industrial organization , business , mathematics , geometry , finance
Using copulas to model the stochastic dependence of values, this article establishes new general conditions for the profitability of product bundling. A multiproduct monopolist generally achieves higher profit from mixed bundling than from separate selling if consumer values for two of its products are negatively dependent, are independent, or have sufficiently limited positive dependence. The profitability of monopoly bundling also extends to situations where a multiproduct firm competes with a single‐product rival.