The Copula Approach to Product Bundling

Résumé

Using copulas to model the stochastic dependence of values, this paper establishes new general conditions for the profitability of product bundling. A multiproduct monopolist generally achieves higher profit from mixed bundling than from separate selling if consumer values for two of its products are negatively dependent, independent, or have sufficiently limited positive dependence. The profitability of monopoly bundling also extends to situations where a multiproduct firm competes with a single-product rival.