This paper offers an equilibrium theory of product bundling by rival firms. In several models where a primary good is produced in a duopoly market and one or more other goods are produced under perfectly competitive conditions, bundling is shown to emerge as an equilibrium strategy of one or...

Sellers sometimes offer goods for sale under both a regular price and a discount for group purchase if the consumer group reaches some minimum size. This selling practice, which we term interpersonal bundling, has been popularized on the Internet by companies such as Groupon. We explain why...