Wednesday, January 23, 2008

Why We Love These Guys

The bundled team of Liebowitz-Margolis has a near monopoly on drollery in econ papers. The latest example being:
When McDonald's sells a hamburger and french fries and a toy together in a happy meal, it has created a bundle made of separate products. McDonald’s practices mixed bundling, however, meaning that you can also buy the food items separately. No one seems to object to the bundle (except for some nanny-wannabes who object to any combination of food sold by McDonald’s).

Your ordinary restaurant, however, is not likely to be so accommodating. There you may order a dish that comes with a vegetable, a starch, and a salad. Although some restaurants have been known to allow users to mix onion rings with french fries, you most often will not be allowed to put a plate together from various sides unless you offer extra money on the side. Sometimes you may not be allowed any mixing and matching of various dishes, as the Jack Nicholson character found out in the famous diner scene from the movie Five Easy Pieces. As the Nicholson character demonstrated, however, bundling can make consumers angry about the loss of choice that would otherwise be available in a-la-carte. Fortunately he did not go to the antitrust authorities to for help, but instead proposed a novel form of unbundling in order to obtain a plain omelet with wheat toast. Unfortunately, the transactions costs turned out to be prohibitive.

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