Bundling

Bundling is the practice of selling two or more goods together at a single price. It is a form of Price Discrimination that exploits heterogeneity in consumers' valuations: when reservation prices for the goods are negatively correlated across consumers, the bundle smooths out the heterogeneity so that almost everyone is willing to pay a similar total — letting the seller charge a single price that captures most of the surplus a separate-pricing strategy would leave on the table.

type: bundling
consumers: C1:90,10,1;C2:80,40,1;C3:40,80,1;C4:10,90,1

When to use

Use bundling whenever a multi-product monopolist faces a population whose tastes across the goods are negatively correlated (the consumer who values X highly tends to value Y less, and vice versa). Bundling is strictly better than separate pricing in this case; with positively correlated valuations or with very heterogeneous totals, separate pricing wins. Mixed bundling — offering both the bundle and the individual goods — generalises and can further increase profit.