Optimal Bundling of Events

Marketing Science, forthcoming

Sreya Kolay and Rajeev K. Tyagi

Abstract

We examine a seller's optimal bundling strategy when it sells two events offered over time. Given the temporal and perishability features of events, a bundle can be sold only in the first period, and the first-period event is unavailable later. We consider the following market features: (i) events may differ in their popularity; (ii) the more popular product is offered first or later; (iii) consumers may be uncertain about their valuation of the later event; (iv) seller may be unable to commit to the price of a future event; and (v) consumer valuations of events are independently distributed or positively correlated. We show how these market features determine the benefit of segmenting consumers with offers of bundle and individual events; the gains from the unconstrained optimization of the second-period event, and its cannibalization effect on first-period offerings. We demonstrate circumstances where the seller's optimal strategy is selling only individual events, only the bundle of events, the bundle of events with only the less popular event offered outside the bundle, or the bundle of events and both events offered outside the bundle. We also show that the seller prefers to offer the more popular event later in all these market settings.

Back to Home Page