  This paper studies pure bundling. Specifically, I show that, under some
conditions, a firm optimally chooses to sell only the full bundle of a given
set of products if and only if the optimal sales volume of the full bundle is
weakly larger than the optimal sales volume for any smaller bundle. I argue
that this characterization can be interpreted as follows: pure bundling is
sub-optimal when there is considerable variation across consumers in how
complementary they find disjoint sub-bundles, and/or when this variation
correlates negatively with their price sensitivity. I then demonstrate--using
simulated data and a random-coefficient discrete choice demand model--that
capturing these two variations is indeed crucial for model selection in the
empirical analysis of bundling decisions.
