Business Intelligence

To Bundle Or Not To Bundle: On The Profitability Of Multi-Item Auctions

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Executive Summary

Bundling, a strategy of selling two or more distinct products as a package for a single price, is widely practiced in today's marketplace. The paper investigates under what conditions it is more profitable to auction two items jointly as a bundle vs. separately, and examines how this is determined by the degree of complementarily of the items, by the amount of heterogeneity in bidders' valuations, by whether the components are auctioned both as a bundle and separately, and by the outside availability of the individual items. The paper provides and empirically tests a conceptual model of variables that influence revenue of bundling versus separate component auctions.

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