TY - JOUR
T1 - The challenge of revenue sharing with bundled pricing
T2 - An application to music
AU - Shiller, Benjamin
AU - Waldfogel, Joel
PY - 2013/4/1
Y1 - 2013/4/1
N2 - Although bundling can substantially increase profits relative to standalone pricing, particularly for zero-marginal-cost information products, it has one major problem: bundling produces revenue that is not readily attributable to particular pieces of intellectual property, creating a revenue division problem. We evaluate several possible solutions using unique song valuation survey data. We find the Shapley value, a well-motivated theoretical solution, is universally incentive compatible (all bundle elements fare better inside the bundle than under standalone pricing), but revenue-sharing schemes feasible with readily available consumption data are not. Among feasible schemes, Ginsburgh and Zang's modified Shapley value performs best. (JEL C71, D79, L14)
AB - Although bundling can substantially increase profits relative to standalone pricing, particularly for zero-marginal-cost information products, it has one major problem: bundling produces revenue that is not readily attributable to particular pieces of intellectual property, creating a revenue division problem. We evaluate several possible solutions using unique song valuation survey data. We find the Shapley value, a well-motivated theoretical solution, is universally incentive compatible (all bundle elements fare better inside the bundle than under standalone pricing), but revenue-sharing schemes feasible with readily available consumption data are not. Among feasible schemes, Ginsburgh and Zang's modified Shapley value performs best. (JEL C71, D79, L14)
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U2 - 10.1111/j.1465-7295.2011.00442.x
DO - 10.1111/j.1465-7295.2011.00442.x
M3 - Article
AN - SCOPUS:84874368507
SN - 0095-2583
VL - 51
SP - 1155
EP - 1165
JO - Economic Inquiry
JF - Economic Inquiry
IS - 2
ER -