Managerial Economics and Strategy, 2/e

10.6 Bundling

Firms with market power often pursue a pricing strategy called bundling: selling multiple goods or services for a single price. Indeed, most goods are bundles of many separate parts. Cars come assembled. Left and right shoes are sold together as a pair and include laces. Usually this bundling is done for efficiency because combining goods in a bundle reduces the transaction costs incurred by consumers or the ­production costs associated with the product. For example, we buy shirts with buttons already attached. Rather than buying shirts without buttons, and then buying buttons, consumers prefer to buy assembled shirts, eliminating the need to make two separate purchases and then sew on buttons. It is also cheaper for the firm to ...