Determination of the bundle price for digital information goods

The fast emergence of Internet as a media to distribute digital information goods created many new opportunities for the packaging and pricing of these goods. The pricing of information goods introduces a challenge since the cost structure of information goods differs from that of conventional physical goods in that they can be costly to introduce but are relatively cheap to reproduce. The bundling strategy for digital information goods helps producers to extract more value from customers and can result in cost savings due to the presence of economies of scale. This study aims to determine the optimum price a producer of digital information goods has to charge for a bundle in order to maximize his gross margin. The bundle pricing model is constructed for both uniform and exponential distributions of the fraction of information goods in the bundle that has positive value for the customers.