Toward Automated Pricing and Bundling of Information Goods

Christopher H. Brooks and Edmund H. Durfee

The introduction of electronic means of sale and dissemination of information goods has made a new set of pricing and bundling strategies possible. In particular, information goods have a negligible marginal cost. This provides producers with an incentive to sell goods in bundles. This new space of strategies also presents producers with a set of problems to solve. In most cases, a producer will need to learn both what prices to charge and what bundles of goods to offer. We discuss how a producer can balance the complexity of a price schedule against the time needed to learn it, with the goal of maximizing its aggregate profit. We then examine how a producer can use taxonomic information about the content of information goods to help discover which goods should be offered for sale and how they should be bundled together. We discuss results to date and present a set of questions for further research.

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