This post contains a video, which is a follow up to my written post ‘Economic Concepts #13 – Commodity Bundling’. I recommend that you read this post as well as watching the video. The written post contains some of the technical and mathematical explanations to accompany the content of the video. The video explains commodity bundling using both real life and hypothetical examples. The real life examples demonstrate how commodity bundling is used. The hypothetical examples explain how commodity bundling can be beneficial to both the buyer and the seller. The video also explains the importance of selecting appropriate products to bundle as well as selecting a price that will attract more customers without losing profits from existing customers.
Just in case, the 3Speak version becomes unavailable at some point. I have also uploaded the video to YouTube.
Definition of commodity bundling
Commodity bundling occurs when a firm sells products individually and in packages. Fast food restaurants often use commodity bundling. Fast food restaurants often sell food or drinks as either individual items or part of a meal. The price of the meal is lower than if the same items had been bought individually.
Commodity bundling can be considered as a form of second degree price discrimination. The buyer chooses if they want to buy products individually at the higher price or buy the bundle at a lower price. However, the bundle may include products that the buyer does not particularly want.
To help follow the hypothetical example in the video, I have included slides containing information about the example. This information includes:
- The 20 buyers’ willingness-to-pay for the five products.
- The cost and price of the products presented as demand and supply curves.
- The products that each person would buy based on their willingness-to-pay and the price of the products.
- The people that would buy the bundle at a price of $14.40 and $14.00 as well as the change in profit to the firm from these decisions.
Demand, supply and price
Product each person would buy individually
People buying the bundle at $14.40
People buying the bundle at $14.00
I hope that you found the video and the slides provided useful. From the information provided in this post and video, do you think commodity bundling is good or bad for customers? What about other forms of price discrimination such as bulk buying or provision of services at a lower price for children or the elderly? I would love you to share your opinions in the comment section.
You may also be interested in watching my video, Price Discrimination (Video Version). The price discrimination video contains more information about price discrimination in general and adds some additional context for the commodity bundling video contained in this post.
If you want to read any of my other posts, you can click on the links below. These links will lead you to posts containing my collection of works. These posts will be updated frequently.
Guide to the Steem Ecosystem (Udemy Course)
I have launched my Udemy course ‘Guide to the Steem Ecosystem’. This course takes you on journey through the Steem Ecosystem. The course consists of 6 sections. These sections are as follows:
- Getting Started
- Navigating Steem Frontends
- Becoming a Steem User
- Behind the Scenes
- The Wonders of the Steem Ecosystem
- Additional Content (SteemFest 4, SMTs, Communities, etc.)
The course contains 56 video lectures (about 13.5 hours of viewing), 56 multiple-choice questions (10 to 12 at the end of each section), and 59 downloadable resources (presentation slides and additional material such as white and blue papers). The course is free-of-charge. Click the link above to access the course.
I also have an economics course, titled Economics is for Everyone, which contains about 4 hours of video content.
Steem - The Future of DApps