Intertemporal mixed bundling strategy of information products with network externality

- We study intertemporalmixed bundling of information goods with network externality.
- A two-period model is proposed for intertemporal mixed bundling of two products.
- The optimal time of releasing a bundle is examined.
- The adoption of “Complete My Bundle” option is evaluated.

This paper proposes a two-period model of intertemporal mixed bundling for two information products with network externality, in which a profit-maximizing monopolist offering two information products in the first period decides the optimal time of bundle release and the adoption of “Complete My Bundle” option. “Complete My Bundle” is an option offered by App Store, with which customers can enjoy the bundle discount even if they purchase all components within the bundle in different time. We demonstrate that the seller should promptly release the bundle in the first period when network externality is moderate-to-high, or the bundle release should be delayed to the second period when network externality is low. The impact of network externality on optimally pricing individual products and bundles depends on the time of bundle release. Offering “Complete My Bundle” option is advantageous in a large number of situations when the seller makes an optimal choice for the time of bundle release. Our analysis provides insightful explanations to real-world practices of intertemporal mixed bundling strategies, and also supports the optimal choices for intertemporally bundling information products.