algo-price-bundle

# Bundle Pricing Strategy ## Overview Bundle pricing sells multiple products together at a combined price, extracting consumer surplus by averaging valuations across products. Works when customers have heterogeneous, negatively correlated valuations. Three types: pure bundling (bundle only), mixed bundling (bundle + individual), unbundling. ## When to Use **Trigger conditions:** - Deciding whether to bundle products/services together - Setting bundle price relative to individual prices - Analyzing whether a current bundle should be unbundled **When NOT to use:** - When products have independent demand with no valuation correlation (bundling adds no value) - When regulations prohibit tying arrangements ## Algorithm ``` IRON LAW: Bundling Increases Profit ONLY With NEGATIVELY CORRELATED Valuations If ALL customers value the same items highly, bundling adds no surplus. Bundling works when: Customer A values Product 1 high + Product 2 low, while Customer B values Product 1 low + Product 2 high. The bundle price captures both at a middle price neither would pay for their low-value item alone. ``` ### Phase 1: Input Validation Collect: individual product valuations (or willingness to pay) per customer segment. Compute correlation of valuations across products. **Gate:** Valuation data available, correlation is negative or mixed. ### Phase 2: Core Algorithm 1. Compute optimal individual prices: maximize Σ(revenue per product) 2. Compute optimal bundle price: find price that...