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Nested Bundling
A nested bundling strategy creates menus in which more expensive bundles include all the goods of the less expensive ones. We study when nested bundling is optimal and determine which nested menu is optimal, when consumers differ in one dimension. We introduce a partial order on the set of bundles, defined by (i) set inclusion and (ii) sales quantity when sold alone. We show that, under quasiconcavity assumptions, if the undominated bundles with respect to this partial order are nested, then nested bundling is optimal. We provide an iterative procedure to determine the minimal optimal menu that consists of a subset of the undominated bundles. The proof technique involves a new constructive monotone comparative statics theorem. We present partial converses. Additionally, we provide distributionally robust characterizations of nested bundling. We also show that under suitable conditions it is possible to extend our analysis to allow multidimensional heterogeneity.
Date:
22 November 2024, 14:15
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room G
Speaker:
Frank Yang (Stanford University)
Organising department:
Department of Economics
Part of:
Nuffield Economic Theory Seminar
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Edward Valenzano
