The role of complementarity of goods in a mixed bundling strategy

Abstract

This paper studies optimal pricing when a monopolist firm produces two complementary goods and may undertake a bundling strategy. To do so, a modified version of Yan and Bandyopadhyay’s (2011) framework is used, in which the efficacy of the bundling strategy depends positively on the degree of complementarity of goods. Two main results are obtained. First, mixed bundling turns out to be the optimal strategy for the firm, since it yields higher profits than pure unbundling and pure bundling. Second, sales and profits from the bundling (unbundling) strategy increase (decrease) as the products become more complementary, which entails an empirically sensible behavior.

Buying vaccines through a single payment as a proxy for procuring vaccines via formularies

“…10 In the R M V in upper-middle-income countries maintains the same shape as in lowermiddle income countries, with a similar difference of 1.5% between benchmark and LuG Results indicate opposite outcomes depending on whether the LuG or benchmark approach was followed. This suggests that the vaccine market might behave similar to other domain industries, where product bundling could offer better results [28]. However, the incremental savings and social surplus are marginal and careful consideration must be placed on the effort needed to implement such a strategy.…”