UC Irvine

Firms offer products or services through different strategies. How to optimally price and bundle products is one of the most fundamental questions facing firms when consumers in the market are heterogeneous in their valuations for products. The pricing and bundling problems become more complicated when competition exists or the product is offered through different platforms. Chapter 1 of my dissertation focuses on the quality-differentiated firms’ bundling strategy for their core and add-on products. Motivated by firms’ distinct bundling practices, I build an analytical model to explain the firms’ optimal strategy. I find the critical role of competition and cost-to-quality ratio in driving the asymmetric firm’s bundling and pricing strategy. When there is more competition from the inferior firm, the superior firm has stronger incentive to bundle its add-on, even when the add-on product is costly.

Further in this direction, to study the firm’s pricing and bundling strategy when the product is offered through different mediums, chapter 2 of my dissertation focuses on the content publisher’s optimal strategy when the content can be offered in digital, physical, or a bundle of mediums. I develop an analytical model and find that offering digital medium only or offering bundle and digital medium can be optimal under different market conditions. Surprisingly, I find consumer surplus and social welfare may decrease as the proportion of digital-savvy consumers increases.

To further study the complementarity and substitutability of platforms, chapter 3 of my dissertation studies how firms should run their targeted advertising on different online platforms, i.e. social media and traditional platform. Specifically, I measure the effectiveness of targeted advertising on social media, relative to that on a traditional platform, on consumers’ ultimate conversions. I measure the interaction effects of the two platforms by using case-control design and post-regularized choice models. I find that targeting across platforms is positively associated with the ultimate conversion for the lower funnel, but there is no measurable synergistic effect for the upper funnel consumers.