On the private and social desirability of mixed bundling in complementary markets with cost savings

We study the private and the social desirability of mixed bundling that generates cost savings in markets for complementary products. Firms always want to adopt such a strategy, and we find that the prices of stand-alone products may decrease when cost savings are important. We also identify an intriguing case where mixed bundling is beneficial for firms, as it depends on the interplay between product substitutability and cost savings in a non-monotonic way. Finally, we highlight situations where private and social interests coincide, and those where they collide.