On the Optimality of Pure Bundling for a Monopolist


This paper considers a monopolist selling two objects to a single buyer with privately observed valuations. We prove that if each buyer's type has a non-negative virtual valuation for each object, then the optimal price schedule is such that the objects are sold only in a bundle; weaker conditions suffice if valuations are independently and identically distributed. Under somewhat stronger conditions, pure bundling is the optimal sale mechanism among all individually rational and incentive compatible mechanisms.

Published as: On the optimality of pure bundling for a monopolist in Journal of Mathematical Economics , Vol. 60, 33-42, March, 2016