How Bundling Benefits Sellers and Buyers
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How Bundling Benefits Sellers and Buyers
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Re: How Bundling Benefits Sellers and Buyers
#2This is true. However it is also true that if you have both bundled and a la carte offerings competing, there is no stable competitive price. See http://firstmonday.org/htbin/cgiwrap/bin/ojs/index.php/fm/rt... for more. So if you're in a market with one pricing structure competing, be careful about choosing the other.
Of course even if the existing market bundles, you may have little choice. Your minimum viable product pretty much by definition cannot be a viable bundle.
Re: How Bundling Benefits Sellers and Buyers
#3The author makes a good point that bundling of services _can_ be of value to both buyers and sellers, but the conclusion that it _is_ of value does not follow.
The example of 2 people, one willing to pay $10 for ESPN and $3 for The History Channel and the other willing to pay $3 for ESPN and $10 for The History Channel disregards the likely majority who would pay $10 for the one and $0 for the other.
The problem with bundles is that they force you to pay for things that have zero value to you. And given that the incremental cost of providing the product approaches zero, this is strongly in the seller's interest.
Re: How Bundling Benefits Sellers and Buyers
#4Fallacy 1: There is a linear relationship between the area the author calls "consumer surplus" and the total happiness of customers.
Fallacy 2: There is no relationship between the act of bundling and the happiness of consumers.
Fallacy 3: The additional money saved by consumers if the goods were not bundled would not be allocated to higher happiness inducing products.
And so on.
There's an argument to be made regarding the paradox of choice and the inconvenience of micro-payment systems, but I don't find this one very convincing.
Re: How Bundling Benefits Sellers and Buyers
#5Interestingly enough, bundling is illegal in some countries...
Re: How Bundling Benefits Sellers and Buyers
#6I'm guessing that most HNers will reject the merits of bundling and it's because they have a limited grasp of human behavior, consumer preferences and economics. Simply: bundling tv channels is much better for everyone.
Here's another example: 100 channels for $1 each. The average customer chooses 30. Bundling all 100 for $40 would benefit everyone.
Re: How Bundling Benefits Sellers and Buyers
#7The author makes a good point that bundling of services _can_ be of value to both buyers and sellers, but the conclusion that it _is_ of value does not follow. The example of 2 people, one willing to pay $10 for ESPN and $3 for The History Channel and the other willing to pay $3 for ESPN and $10 for The History Channel disregards the likely majority who would pay $10 for the one and $0 for the other. The problem with…
But really no one places zero value on anything which is why your argument breaks down.
Re: How Bundling Benefits Sellers and Buyers
#8The author makes a good point that bundling of services _can_ be of value to both buyers and sellers, but the conclusion that it _is_ of value does not follow. The example of 2 people, one willing to pay $10 for ESPN and $3 for The History Channel and the other willing to pay $3 for ESPN and $10 for The History Channel disregards the likely majority who would pay $10 for the one and $0 for the other. The problem with…
But really no one places zero value on anything which is why your argument breaks down.
A low value relative to the others doesn't really affect the analysis. I'm sure there are tons of channels people don't go to each month.
Imagine being an English only speaker and getting a Spanish channel - what would you pay for it?
Re: How Bundling Benefits Sellers and Buyers
#9Fallacy 1: There is a linear relationship between the area the author calls "consumer surplus" and the total happiness of customers. Fallacy 2: There is no relationship between the act of bundling and the happiness of consumers. Fallacy 3: The additional money saved by consumers if the goods were not bundled would not be allocated to higher happiness inducing products. And so on. There's an argument to be made regard…
Another argument is the negative feeling you get from adding each additional channel. Saying let's pay another $1 for channel X 30 times has a higher negative perception than saying - oh $30 for 30 channels.
Re: How Bundling Benefits Sellers and Buyers
#10The author makes a good point that bundling of services _can_ be of value to both buyers and sellers, but the conclusion that it _is_ of value does not follow. The example of 2 people, one willing to pay $10 for ESPN and $3 for The History Channel and the other willing to pay $3 for ESPN and $10 for The History Channel disregards the likely majority who would pay $10 for the one and $0 for the other. The problem with…
But really no one places zero value on anything which is why your argument breaks down.
Why would I not value a channel I will absolutely not watch at all at $0?