Consumers Prefer Bundled Add-Ins

Rajiv M. Dewan, Marshall L. Freimer

Research output: Contribution to journalReview articlepeer-review

30 Scopus citations

Abstract

Software such as operating systems, word processing, spreadsheets, graphics, and others often serves as a base for a number of third-party add-in products or plug-ins. These add-ins enhance the functionality of the base product. Unless protected by patents, these add-ins can potentially be bundled into the base software. The impact of this bundling on the profits of the base software producer and the consumer depends on the proportion of consumers that value the add-in and the penalty that some consumers incur from finding only a bundled product available when they do not desire the add-in. Using a model of the market, we show that the price of the bundle will be less than the sum of the prices of the base and add-in software when they are sold separately. We also show that the total consumer surplus and the social welfare increase if the base software producer's profit increases with bundling.

Original languageEnglish (US)
Pages (from-to)99-111
Number of pages13
JournalJournal of Management Information Systems
Volume20
Issue number2
DOIs
StatePublished - 2003
Externally publishedYes

Keywords

  • Bundled software
  • Consumer welfare
  • Information goods
  • Software add-ins
  • Supplemental goods

ASJC Scopus subject areas

  • Management Information Systems
  • Computer Science Applications
  • Management Science and Operations Research
  • Information Systems and Management

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