Bundling, unbundling, and pricing of multiform products: The case of magazine content

The Internet has given rise to a new class of multiform (i.e., hybrid) products that can be offered in both offline and online forms, such as music and magazines. The online medium enables bundling, and unbundling, of such products at negligible cost. Focusing on a print magazine publisher, we develop an analytical model to address three questions. Under what product-market conditions should the seller offer the magazine content online? What assortment of online forms (bundle, unbundled modules, or both) is optimal? What are the pricing implications? A key result is that going online is profit enhancing even when the market strongly prefers the print medium and there are no advertising revenues. Under these circumstances, the online modules, rather than the online bundle, better complements the print bundle. Also, the wider the product line, the higher the prices of the individual products.

[1]  L. Sibley.  Parasites: No more free lunch , 2002, Nature.

[2]  Richard Staelin,et al.  An Industry Equilibrium Analysis of Downstream Vertical Integration , 2008, Mark. Sci..

[3]  M. Salinger.  A Graphical Analysis of Bundling , 1995 .

[4]  Allen M. Weiss,et al.  Unbundling of Industrial Systems , 1990 .

[5]  Raghuram Iyengar,et al.  Nonlinear pricing , 2022 .

[6]  S. Balasubramanian.  Mail Versus Mall: a Strategic Analysis of Competition Between Direct Marketers and Conventional Retailers , 1998 .

[7]  Richard Schmalensee,et al.  Gaussian Demand and Commodity Bundling , 1984 .

[8]  Yannis Bakos,et al.  Bundling and Competition on the Internet , 1999 .

[9]  Arthur Lewbel,et al.  Bundling of substitutes or complements , 1985 .

[10]  Vijay Mahajan,et al.  Products with Branded Components: An Approach for Premium Pricing and Partner Selection , 1997 .

[11]  W. Kamakura,et al.  Optimal Bundling and Pricing Under a Monopoly: Contrasting Complements and Substitutes from Independently Valued Products , 2003 .

[12]  M. Whinston,et al.  Multiproduct Monopoly, Commodity Bundling, and Correlation of Values , 1989 .

[13]  Arvind Rangaswamy,et al.  Opportunities and challenges in multichannel marketing: An introduction to the special issue , 2005 .

[14]  Janet L. Yellen,et al.  Commodity Bundling and the Burden of Monopoly , 1976 .

[15]  Steven M. Shugan.  Editorial: Marketing Science, Models, Monopoly Models, and Why We Need Them , 2002 .

[16]  Yannis Bakos,et al.  Bundling Information Goods: Pricing, Profits and Efficiency , 1998 .

[17]  Jeffrey K. MacKie-Mason,et al.  Pricing and Bundling Electronic Information Goods : Field Evidence , .

[18]  David de Meza,et al.  A strategic motivation for commodity bundling , 1990 .

[19]  V. Srinivasan,et al.  A Survey-Based Method for Measuring and Understanding Brand Equity and Its Extendibility , 1994 .

[20]  Jeffrey K. MacKie-Mason,et al.  PEAK: Pricing Electronic Access to Knowledge , 1997 .

[21]  Charles B. Weinberg,et al.  Pricing a Bundle of Products or Services: The Case of Nonprofits , 1996 .

[22]  Hal R. Varian,et al.  Information rules - a strategic guide to the network economy , 1999 .

[23]  Pierre Regibeau,et al.  Compatibility and Bundling of Complementary Goods in a Duopoly , 1992 .

[24]  Daniel J. Seidmann.  Bundling as a Facilitating Device: A Reinterpretation of Leverage Theory , 1991 .