Bundling as an optimal selling mechanism for a multiple-good monopolist

Alejandro Manelli, Daniel R. Vincent

Research output: Contribution to journalArticle

73 Scopus citations

Abstract

Multiple objects may be sold by posting a schedule consisting of one price for each possible bundle and permitting the buyer to select the price-bundle pair of his choice. We identify conditions that must be satisfied by any price schedule that maximizes revenue within the class of all such schedules. We then provide conditions under which a price schedule maximizes expected revenue within the class of all incentive compatible and individually rational mechanisms in the n -object case. We use these results to characterize environments, mainly distributions of valuations, where bundling is the optimal mechanism in the two and three good cases.

Original languageEnglish (US)
Pages (from-to)1-35
Number of pages35
JournalJournal of Economic Theory
Volume127
Issue number1
DOIs
StatePublished - Mar 1 2006

Keywords

  • Adverse selection
  • Auctions
  • Incentive compatibility
  • Monopoly pricing
  • Multi-dimensional mechanism design
  • Price discrimination

ASJC Scopus subject areas

  • Economics and Econometrics

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