Chapter 14-Monopoly bundling Formal analysis of monopoly bundling ° Bundling≈ menu pricing e If bundle price sum of prices of components>non linear pricing with quantity discounts Twisted form of menu pricing: set unique price for several goods to v consumer heterogeneity Illustration 2 products(produced at zero cost), 2 consumers Valuations Product 1 Product 2 Negative Consumer 1 correlation Consumer 2 32 23 But result holds more generally Separate sales: p,=p2=2, T=8 ° Bundling:p=5,T=10 e Wen Cao© Wen Cao 5 Formal analysis of monopoly bundling • Bundling  menu pricing •If bundle price < sum of prices of components  non linear pricing with quantity discounts • Twisted form of menu pricing: set unique price for several goods to  consumer heterogeneity • Illustration • 2 products (produced at zero cost), 2 consumers • Valuations • Separate sales: p1  p2  ,   • Bundling: p  ,   Chapter 14 - Monopoly bundling Product 1 Product 2 Consumer 1 3 2 Consumer 2 2 3 Negative correlation But result holds more generally