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Bundling Information Goods of Decreasing Value

Author

Listed:
  • Xianjun Geng

    (Department of Management Science, University of Washington Business School, Seattle, Washington 98195)

  • Maxwell B. Stinchcombe

    (Department of Economics, The University of Texas at Austin, Austin, Texas 78712)

  • Andrew B. Whinston

    (Department of Management Science and Information Systems, The University of Texas at Austin, Austin, Texas 78712)

Abstract

Consumers' average value for information goods, websites, weather forecasts, music, and news declines with the number consumed. This paper provides simple guidelines to optimal bundling marketing strategies in this case. If consumers' values do not decrease too quickly, we show that bundling is approximately optimal. If consumers' values to subsequent goods decrease quickly, we show by example that one should expect bundling to be suboptimal.

Suggested Citation

  • Xianjun Geng & Maxwell B. Stinchcombe & Andrew B. Whinston, 2005. "Bundling Information Goods of Decreasing Value," Management Science, INFORMS, vol. 51(4), pages 662-667, April.
    • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:4:p:662-667
    DOI: 10.1287/mnsc.1040.0344
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    References listed on IDEAS

    as
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