Pure vs. mixed commodity bundling

In the commodity bundling literature, pure bundling is ruled out as a uniquely optimal strategy because mixed bundling is always (weakly) better. This paper provides a theoretical distinction between the two pricing schemes. The distinction relies on the degree of consumer heterogeneity in reservation prices. While there is a lack of empirical evidence on commodity bundling pricing schemes due to the difficulties in measuring consumer heterogeneity, we circumvent this problem by examining firm heterogeneity. Specifically, we use data from the newspaper industry in which some two edition newspaper firms are mixed bundlers and others are pure bundlers.

Authors and Affiliations

1. Department of Economics, Bureau of Labor Statistics, Ohio University, 45701, Athens, OH, USA

   Brooks Pierce & Harold Winter

We are grateful to William Neilson for providing us with several helpful insights. We also benefitted from comments by Tony Caporale, Donald Deere, James Griffin, Kristin McCue, and Curtis Taylor. The views expressed are those of the authors and do not necessarily reflect the views or policies of the BLS or any other agency of the US Department of Labor.

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