Teaching Bundling Theory with Simple Geometry

This paper shows how we might successfully introduce students in principles and intermediate microeconomic theory classes to the topic of bundling, i.e., the selling of two or more goods as a package, rather than separately. It is surprising how much students can learn using only the tools of highschool geometry. Specifically, one can prove that with independently distributed reservation prices, pure bundling raises both profits and consumers’ surplus. We also explore the topic of mixed bundling, where both bundles and separate sales are conducted.