On the optimality of pure bundling for a monopolist

This paper considers a monopolist selling two objects to a single buyer with privately observed valuations. We prove that if the virtual valuation for each object is non-negative for all possible types, then the optimal price schedule is such that the objects are sold only in a bundle. Under an addi...

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Bibliographic Details
Published inJournal of mathematical economics Vol. 60; pp. 33 - 42
Main Authors Menicucci, Domenico, Hurkens, Sjaak, Jeon, Doh-Shin
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.10.2015
Elsevier Sequoia S.A
Subjects
Bundling
Monopolies
Monopoly pricing
Multi-dimensional mechanism design
Price discrimination
Pricing policies
Pure bundling
Studies
Valuation methods
Pure bundling
Monopoly pricing
Price discrimination
Multi-dimensional mechanism design
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Summary:This paper considers a monopolist selling two objects to a single buyer with privately observed valuations. We prove that if the virtual valuation for each object is non-negative for all possible types, then the optimal price schedule is such that the objects are sold only in a bundle. Under an additional regularity condition, pure bundling is the optimal sale mechanism among all individually rational and incentive compatible mechanisms.
ISSN:0304-4068
1873-1538
DOI:10.1016/j.jmateco.2015.06.011