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We study when pure bundling, i.e., offering only the grand bundle of all products, is optimal for a multi-product monopolist. Pure bundling is optimal if consumers with higher value for the grand bundle have lower relative disutility for consuming smaller bundles. Conversely, pure bundling is not optimal if consumers with higher value for the grand bundle have higher relative disutility for consuming smaller bundles. We prove the results using a decomposition approach that relies on identifying binding incentive constraints with multi-dimensional heterogeneity.
