On the optimality of pure bundling for a monopolist

Recognition Program

Authors: Domenico Menicucci, Sjaak Hurkens and Doh-Shin Jeon

Journal of Mathematical Economics, Vol. 60, 33-42, March, 2016

This paper considers a monopolist selling two objects to a single buyer with privately observed valuations. We prove that if the virtual valuation for each object is non-negative for all possible types, then the optimal price schedule is such that the objects are sold only in a bundle. Under an additional regularity condition, pure bundling is the optimal sale mechanism among all individually rational and incentive compatible mechanisms.

This paper originally appeared as Barcelona GSE Working Paper 771
This paper is acknowledged by the Barcelona GSE Research Recognition Program