PURE VS MIXED COMMODITY BUNDLING

In the commodity bundling literature, pure bundling is ruled out as a uniquely optimal strategy because mixed bundling is always (weakly) be tter. This paper provides a theoretical distinction between the two pr icing schemes. The distinction relies on the degree of consumer hetero geneity in reservation prices. While there is a lack of empirical evid ence on commodity bundling pricing schemes due to the difficulties in measuring consumer heterogeneity, we circumvent this problem by examin ing firm heterogeneity. Specifically we use data from the newspaper in dustry in which some two edition newspaper firms are mixed bundlers an d others are pure bundlers.