DP10313 Pricing a Package of Services

Author(s): Felix Ketelaar, Dezso Szalay
Publication Date: December 2014
Keyword(s): Bundling, Monopoly, Multidimensional screening, Price discrimination
JEL(s): D42, D82, D86
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10313

We study a tractable two-dimensional model of price discrimination. Consumers combine a rigid with a more flexible choice, such as choosing the location of a house and its quality or size. We show that the optimal pricing scheme involves no bundling if consumer types are affiliated. Conversely, if consumer types are negatively affiliated over some portion of types then some bundling occurs.