Abstract:
This paper focuses on developing a business model that explains why
certain companies would bundle their products with donations to charity.
The model assumes that consumers are individuals that maximize their
utility subject to their income and companies are agents that maximize
their profts subject to prices and costs. The type of firm that we will focus
on will be the monopoly. We will investigate the different situations where
a monopoly might choose to engage in charity-linked product bundling and
look at several factors that may lead to their decision to do so. These
factors include: small vs. large prices, homogeneous vs. heterogeneous
populations, and strong vs. weak consumer preferences for charitable
donations. In the end, the model shows when a why a firm would choose to
market a charity-linked product, even when it is the firm who pays for the
entire price of the donation.
