Advances in Economics and Business Vol. 1(1), pp. 6 - 21
DOI: 10.13189/aeb.2013.010102
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Welfare Analysis and Policy Implications of Bundling Decisions by Firms


Xeni Dassiou*, Dionysius Glycopantis
Department of Economics, City University London, London EC1V 0HB, UK

ABSTRACT

This paper models an original approach where the monopolist firm no longer uses pure bundling with weights 1:1. The decisions of the firm take place in a two-step optimisation process. In the first stage, using port- folio optimisation it decides whether to bundle and also sets the optimal weight for each good. In the second stage, it sets the profit maximising bundle price on the basis of the chosen weights. We compare the profit, consumer and welfare implications of our pure bundling model to the usual 1:1 pure bundling model, and comment on the competition policy making implications.

KEYWORDS
Pure bundling, Bundle weights, Risk aversion, Portfolio optimisation, Bundle dispersion, Bundle mean

Cite this paper
Xeni Dassiou , Dionysius Glycopantis . "Welfare Analysis and Policy Implications of Bundling Decisions by Firms." Advances in Economics and Business 1.1 (2013) 6 - 21. doi: 10.13189/aeb.2013.010102.