Article

On the Optimality of Pure Bundling for a Monopolist

Domenico Menicucci, Sjaak Hurkens, and Doh-Shin Jeon

Abstract

This paper considers a monopolist selling two objects to a single buyer with privately observed valuations. We prove that if each buyer’s type has a non-negative virtual valuation for each object, then the optimal price schedule is such that the objects are sold only in a bundle; weaker conditions suffice if valuations are independently and identically distributed. Under somewhat stronger conditions, pure bundling is the optimal sale mechanism among all individually rational and incentive compatible mechanisms.

Keywords

Monopoly Pricing; Price discrimination; Multi-dimensional mechanism design; Pure Bundling;

JEL codes

  • D42: Monopoly
  • D82: Asymmetric and Private Information • Mechanism Design
  • L11: Production, Pricing, and Market Structure • Size Distribution of Firms

Reference

Domenico Menicucci, Sjaak Hurkens, and Doh-Shin Jeon, “On the Optimality of Pure Bundling for a Monopolist”, Journal of Mathematical Economics, vol. 60, 2015, pp. 33–42.

See also

Published in

Journal of Mathematical Economics, vol. 60, 2015, pp. 33–42