Title: Convex Optimization for Bundle Size Pricing Problem

Abstract: We study the bundle size pricing (BSP) problem where a monopolist sells bundles of products to customers, and the price of each bundle depends only on the size (number of items) of the bundle. Although this pricing mechanism is attractive in practice, finding optimal bundle prices is difficult since it involves characterizing distributions of the maximum partial sums of order statistics. In this paper, we propose to solve the BSP problem under a choice model using only the first and second moments of customer valuations. We show that the BSP problem under this model is convex and can be efficiently solved using off-the-shelf solvers. Our approach is flexible in optimizing the price for any given bundle sizes. Numerical results show that it performs very well compared with state-of-the-art heuristics.