Departmental Seminar

08/01/2013 - 14:00

Speaker:

 

 Prof. Ashutosh Prasad

Jindal School of Management

The University of Texas at Dallas

 


Title:

 

Product Bundling and Reserved Product Pricing

 

 

 

Abstract:

Mixed bundling, in which products are sold separately and as a bundle, is a form of second degree price discrimination. In a first such approach, we examine how mixed bundling and its variants stack up against reserved product pricing (RPP), a generalization of inter-temporal price discrimination to a multi-product setting. Used by Amazon.com, among others, RPP consists of the firm offering individual products and then enticing single product buyers with a discount on the second product. Unlike traditional cross-selling, RPP deals are more narrowly targeted. Our analytical model has a monopolist offering two products to a mix of myopic and strategic consumers. Our core findings: (a) neither RPP nor mixed bundling is always the best; (b) so long as the market consists of a “modest” fraction of myopic consumers, RPP is more profitable than mixed bundling and its special cases. We also present and discuss pricing results under RPP.

KEYWORDS: pricing; bundling; inter-temporal price discrimination; cross-selling