To bundle or not to bundle

Commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only. Bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation, or if the distribution of valuations is very peaked around the mean. ∗This note unbundles results previously provided in Fang and Norman [5]. We thank Mark Armstrong, Ted Bergstrom, Larry Samuelson, Bill Sandholm, Ananth Seshadri, and Stephen Morris for comments and helpful discussions. We also thank seminar participants at New York University, Ohio State University, University of Essex, University of Illinois, University of Pittsburgh, University of Wisconsin, Yale, SITE 2003 Summer Workshop at Stanford, and the SED 2003 meetings in Paris. The usual disclaimer applies. †Department of Economics, Yale University, P.O. Box 208264, New Haven, CT 06520-8264. Email: [email protected] ‡Department of Economics, University of Wisconsin-Madison, 1180 Observatory Drive, Madison, WI 53706-1393. Email: [email protected]