Business Models
Product Bundling
Also Known As Commodity Bundling
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A business model in which several products or services are sold together as one package. William J. Adams and Janet L. Yellen's 1976 paper Commodity Bundling and the Burden of Monopoly (Quarterly Journal of Economics) established the practice as a formal subject of economic analysis, showing bundling is particularly effective for digital information goods with near-zero marginal cost, where it can let an inferior bundle outcompete superior standalone offerings.
Facts
Core MechanismSeveral products or services are offered for sale as one combined package rather than separately, which lets a seller capture more total revenue than individual pricing when buyers place different relative values on the components, and works best where there are economies of scale in production or scope in distribution and low marginal cost to bundling. 1 Origin YearMarks the year of the seminal academic formalization (Adams and Yellen), not the practice's first commercial use, which predates the theory and has no single citable founding date. Cross-Tradition Connections
Associated With
Microsoft's 1990 Office suite is a standing example of software product bundling: separate applications sold together as one package.
The seminal academic research on bundling economics, cited by the source article, found the strategy particularly effective for digital information goods, the technology industry's own product category, because of their near-zero marginal cost.
Sources
1. Wikipedia, Product Bundling
Wikipedialead sectionQuote, lead section
offering several products or services for sale as one combined product or service package
1. Wikipedia, Product Bundling
WikipediaRationaleQuote, Rationale
Consumers have heterogeneous demands and such demands for different parts of the bundle product are inversely correlated
1. Wikipedia, Product Bundling
WikipediaAssociated With: Technology Industry, Theoretical background sectionQuote, Associated With: Technology Industry, Theoretical background section
Research by Yannis Bakos and Erik Brynjolfsson found that bundling was particularly effective for digital information goods with close to zero marginal cost.
Wikipedia, Microsoft
WikipediaAssociated With: Microsoft, 1985-1994: Windows and Office sectionQuote, Associated With: Microsoft, 1985-1994: Windows and Office section
In 1990, Microsoft introduced the Microsoft Office suite which bundled separate applications such as Microsoft Word and Microsoft Excel.
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