Skip to main content Accessibility help
×
Home

Bundling Commodities and Attached Services with Nonlinear Pricing

Published online by Cambridge University Press:  09 January 2015

Jean-Christophe Poudou
Affiliation:
LAMETA, University of Montpellire I
Corresponding
Get access

Summary

This paper analyzes optimal nonlinear pricing for a monopoly supplying a bundle of a commodity and a related service, where the consumers' private information is captured by scalar variable. With constant marginal costs, we find the standard result where the good and the service in the bundle are lower than separately. However, under the increasing cost assumption, when the degree of the complementarity becomes sufficiently high, the marginal price of separate good is lower than the good price in the bundle. Contrary to Martimort (1992), when good and service are perfectly complementary, we can not conclude that it is costly for consumers to sign two contracts from different shops than to buy the bundle. Because of asymmetric properties in the utility function, profitability result of bundling strategy depends, on the one hand, on the degree of complementarity between commodity and related service and on the other hand, on the degree of the optional service.

Type
Research Article
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2012

Access options

Get access to the full version of this content by using one of the access options below.

References

[1] Adams, W. J. and Yellen, J. L. (1976). “Commodity Bundling and the Burden of Monopoly”, Quarterly Journal of Economics, vol. 91, pp. 475498.CrossRefGoogle Scholar
[2] E., Bateson J. (1995). Managing Services Marketing, The Dryden Press.Google Scholar
[3] Burstein, M. L. (1960). “The Economics of Tie-In Sales”, The Review of Economics and Statistics, vol. 42, pp. 6873.CrossRefGoogle Scholar
[4] Martimort, D. (1992). “Multi-principaux avec Anti-selection”, Annales d'économie et de statistique, vol. 28.Google Scholar
[5] Martimort, D. (1996). “Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory”, RAND Journal of Economics, vol. 27, pp. 131.CrossRefGoogle Scholar
[6] Maskin, E. and Riley, J. (1984). “Monopoly with Incomplete Information”, RAND Journal of Economics, vol. 15, pp. 171196.CrossRefGoogle Scholar
[7] McAfee, R. P., McMillan, J. and Whinston, M. D. (1989). “Multiproduct Monopoly, Commodity Bundling, and Correlation of Values”, Quarterly Journal of Economics, vol. 104, pp. 371383.CrossRefGoogle Scholar
[8] Mussa, M. and Rosen, S. (1978). “Monopoly and Product Quality”, Journal of Economic Theory, vol. 18, pp. 301317.CrossRefGoogle Scholar
[9] Nalebuff, B. (2004). “Bundling as an Entry Barrier”, Quarterly Journal of Economics, vol. 119, pp. 159187.CrossRefGoogle Scholar
[10] Olsen, T. and Osmundsen, P. (2001). “Strategic Tax Competition; Implications of National Ownership”, Journal of Public Economics, vol. 81, pp. 253277.CrossRefGoogle Scholar
[11] Podestà, M. and Poudou, J.-C. (2008) “Optimal nonlinear pricing, bundling com-modities and contingent services”, Working Paper CREDEN, 08.04.76 (www.creden.univ-montpl.fr/fr/publications.html)Google Scholar
[12] Schmalensee, R. (1982). “Commodity Bundling by Single-Product Monopolies”, Journal of Law and Economics, vol. 15, pp. 6771.CrossRefGoogle Scholar
[13] Schmalensee, R. (1984). “Gaussian Demand and Commodity Bundling”, Journal of Business, vol. 57, pp. 211230.CrossRefGoogle Scholar
[14] Wilson, R. (1993). Nonlinear Pricing, Oxford University Press.Google Scholar

Full text views

Full text views reflects PDF downloads, PDFs sent to Google Drive, Dropbox and Kindle and HTML full text views.

Total number of HTML views: 0
Total number of PDF views: 3 *
View data table for this chart

* Views captured on Cambridge Core between September 2016 - 21st January 2021. This data will be updated every 24 hours.

Hostname: page-component-76cb886bbf-gtgjg Total loading time: 0.419 Render date: 2021-01-21T12:35:36.583Z Query parameters: { "hasAccess": "0", "openAccess": "0", "isLogged": "0", "lang": "en" } Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": false, "newCiteModal": false }

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Bundling Commodities and Attached Services with Nonlinear Pricing
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

Bundling Commodities and Attached Services with Nonlinear Pricing
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

Bundling Commodities and Attached Services with Nonlinear Pricing
Available formats
×
×

Reply to: Submit a response


Your details


Conflicting interests

Do you have any conflicting interests? *