Bundling Information Goods of Decreasing Value
Xianjun Geng, Maxwell B. Stinchcombe, Andrew B. Whinston
Management Science · 2005 · Volume 51 · Issue 4
Abstract
Consumers’ average value for information goods, websites, weather forecasts, music, and news declines with the number consumed. This paper provides simple guidelines to optimal bundling marketing strategies in this case. If consumers’ values do not decrease too quickly, we show that bundling is approximately optimal. If consumers’ values to subsequent goods decrease quickly, we show by example that one should expect bundling to be suboptimal.
Keywords
bundling, electronic commerce, price discrimination, digital products
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