21.21 Bundling

	Equipment	Installation
Customer Type 1	$8,000	$2,000
Customer Type 2	$5,000	$3,000

Say we have equal numbers of type 1 and type 2, then you would like to charge $5,000 for the equipment and $2,000 for installation when considering equipment and installment equally . If you price it separately, then your total profit is 14,000.

But you bundle, you get $16,000.

If we know that bundles work. But we don’t see every company does ti?

Because it depends on the number of type 1 and 2 customers, and negative correlation in willingness to pay.

For example:

• Information Products

  • margin cost is close to 0.

  • Bundling of info products is very easy

  • hence always bundle