CLOSED-FORM SOLUTIONS TO BUNDLING PROBLEMS

This paper investigates the case of a monopolist selling two distinct goods to a group of in traders who are characterized by their reservation prices, which are drawn independently from uniform distributions over the intervals [0, R(1)] and [0, R(2)]. Closed-form solutions are derived for optimal prices, quantities, profits, and consumers surplus under situations of separate sales, pure bundling, and mixed bundling. This allows a clear comparison of the price, output, and welfare effects of various forms of bundling. We further investigate situations of positive marginal cost, positive and negative correlation of reservation values, and substitutes and complements.