Online sequential bundling: profit analysis and practice

We investigate monopoly profit under a new online tying strategy, namely sequential bundling. This method allows customers to buy additional products at discounted prices immediately after purchasing one or some of the available products. This strategy has been practiced by Walmart and others but has not been modelled to date. We use microeconomics analysis to conduct a comparison of the gained profit with the three commonly used bundling strategies: no bundling, pure bundling and mixed bundling. The main result shows that the sequential bundling strategy yields higher profits in comparison to all three classic strategies. In particular, for the symmetric cost case, our model provides a useful tool for practitioners such as common online shops.