Bundle Pricing Strategy

Overview

Bundle pricing sells multiple products together at a combined price, extracting consumer surplus by averaging valuations across products. Works when customers have heterogeneous, negatively correlated valuations. Three types: pure bundling (bundle only), mixed bundling (bundle + individual), unbundling.

When to Use

Trigger conditions:

• Deciding whether to bundle products/services together
• Setting bundle price relative to individual prices
• Analyzing whether a current bundle should be unbundled

When NOT to use:

• When products have independent demand with no valuation correlation (bundling adds no value)
• When regulations prohibit tying arrangements

Algorithm