is a form of two-part pricing used by companies with market strength to increase profits. The idea of bundle pricing is one that you are already familiar with if you have ever bought a 12-pack of soda, a year's worth of tax preparation services, or a "1+1=3" deal. Profits can be increased if products are bought as a single package or bundle of goods or services when there is a big customer surplus.
Bundles might consist of a single item, such as soft drinks or legal services, or they can be made up of several items and services that are closely tied to one another. For instance, "luxury packages" of new automobile features like power steering, power brakes, automatic transmissions, tinted windows, and others are frequently bundled by automakers. Similar to this, auto dealers frequently offer "special package prices" on services.
The ideal level of production is established by setting the price equal to the marginal cost and figuring out the quantity, much like in the case of two-part pricing. The whole area under the demand curve at that moment is the optimal bundle price, which is a single lump sum payment.
The best price for packages of related but distinct items is calculated in a similar way. Once more, when output is viewed as a collection of connected commodities or services, the total amount charged equates to the value of the complete area under the demand curve at the optimal production level.
Since businesses are unable to accurately predict the prices that various customers are prepared to pay for various items, bundle pricing is occasionally employed when related but not identical products are involved.
Managers might increase profits by closely linking the price charged to the value received by each client if they have precise knowledge of the worth of each unique product for each individual consumer.