Bundling Information Products

With the development of the Internet, e-business has become popular. Increasingly, e-journals are being sold via the Internet. E-Journals have two main characteristics: one is the low marginal cost associated with access; the other is the large number of items. For the commercially motivated seller, the issue of bundling a large number of low marginal cost items so as to maximize profits needs to be dealt with. In this thesis, a solution by way of an intermediate bundle is proposed, which means that one more intermediate article bundle is supplied by seller with other two bundles: the respective article selling and journal selling. It is found that the profit obtained under the proposed procedure is 4% to 5% higher than that under the Chuang-Sirbu procedure, which is currently adopted by many sellers. Furthermore, when the number of products involved is not extremely large, the proposed procedure yields a profit level that is closer to the first price discrimination profit level than the Armstrong two-part tariff procedure, while when the number of products rise steadily, two-part tariff procedure will dominate the proposed selling strategy. In this thesis, a heuristic rule to facilitate the determination of the optimal intermediate bundle size is also proposed. This is designed to avoid the lengthy simulation procedure that will be needed otherwise. Further more, the optimal intermediate bundle size is contradict our intuition, which need to be explained by further research.