Bundling and Menus of Two-Part Tariffs

21 Pages Posted: 9 Oct 2003

See all articles by Sreya Kolay

Sreya Kolay

Paul Merage School of Business, University of California, Irvine.

Greg Shaffer

University of Rochester - Simon Business School

Abstract

Inducing self-selection among different segments of consumers is an important issue in pricing. Some firms induce self-selection by offering a menu of two-part tariffs (e.g., different rate plans) and letting consumers select the tariff and quantity they prefer. Other firms induce self-selection by offering a menu of price-quantity bundles (e.g., different package sizes) and letting consumers select only from among these bundles. We show that bundling is more profitable absent cost considerations. Social welfare may be higher or lower with bundling.

Suggested Citation

Kolay, Sreya and Shaffer, Greg, Bundling and Menus of Two-Part Tariffs. Available at SSRN: https://ssrn.com/abstract=444354

Sreya Kolay (Contact Author)

Paul Merage School of Business, University of California, Irvine. ( email )

United States

HOME PAGE: http://sreya.kolay.googlepages.com

Greg Shaffer

University of Rochester - Simon Business School ( email )

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