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In economics this is referred to as "bundling". By selling multiple products together you can extract more surplus from customers with diversified tastes. Say,
by cjy 16y ago
In economics this is referred to as "bundling". By selling multiple products together you can extract more surplus from customers with diversified tastes.
Say, Customer 1 is willing to pay $100 per month for Basecamp and $60 per month for Highrise.
And, Customer 2 is willing to pay $60 per month for Basecamp and $100 per month for Highrise.
If you know this, and you charge for the products individually, the profit maximizing price is $60 for each good and total revenue is $240.
However, if you charge for the products as a bundle the profit-maximizing price is $160 per bundle and the total revenue is $320.
It's a smart move to charge using bundles when your marginal cost is low and there is a lot of variety in demand.