Authors: Rustam Ibragimov, Artem Prokhorov and Johan Walden
Abstract: We develop a general framework for modelling the optimal bundling strategies of a multiproduct monopolist providing goods that have extreme and dependent valuations by consumers. The strategies crucially depend on the degree of heavy-tailedness of consumers' valuations, their dependence structure, and the degrees of complementarity and substitutability among the goods provided. For substitutes with suciently high degree of substitutability, the seller's optimal strategy is to provide goods separately. Provision of the goods as a single bundle is optimal for the seller in the case of complements and substitutes with relatively low degree of substitutability.