Closed-Form Solutions to Bundling Problems J OHN C. ECKALBAR Department of Economics California State University Chico, CA 95929 jeckalbar@csuchico.edu This paper investigates the case of a monopolist selling two distinct goo group of m traders who are characterized by their reservation prices, w drawn independently from uniform distributions over the intervals [0, R 1 ] and [0, R 2 ]. Closed-form solutions are derived for optimal prices, quantities, p and consumers’ surplus under situations of separate sales, pure bundling, and mixed bundling. This allows a clear comparison of the price, output welfare effects of various forms of bundling. We further investigate situ positive marginal cost, positive and negative correlation of reservation v and substitutes and complements. 1. Introduction A monopolist who offers a single good at the same price to all potential buyers is likely to be frustrated by two facts: First,the seller knows that there are buyers who would have been willing to pay more than the current price. Second,the seller knows that some of the potential buyers who choose not to buy the product would have been willing to pay a price below the monopolist’s asking price but above the marginal cost.This “single-price frustration” has been studied for years under the heading of price discrimination, that is, charging different prices to different buyers of the same product. Multiproduct firms have another option which can relieve the single-price frustration: they can bundle their products and sell them as a single item, such as a computer along with an office suite, or a car with a navigation system. Bundling may either be “pure,” meaning only the bundle is offered, or it may be “mixed,” meaning that both the bundle and the separate goods are offered. The author is pleased to acknowledge an exceptional level of assistance from the editor and two referees. C 2010, The Author(s) Journal Compilation C 2010 Wiley Periodicals, Inc. Journal of Economics & Management Strategy , Volume 19, Number 2, Summer 2010, 513–544