As product line broadens, a firm faces very difficult decision-making problems of pricing two or more products and services. Pricing of product bundles is one of such difficult problems marketing managers have to solve. Although some studies report the usefulness of product bundling, there are few empirical studies on the determination of bundle price in practice. This thesis presents a product bundling decision model which considers the reservation price, the product complementarity, and the cost structure. It also presents estimation methods of reservation price, a core input for the determination of bundle price. The estimation is based on the modified multi-attribute utility model which incorporates situation variables which influence consumers in purchasing the product. The situation variables considered in the model are consumer's attitude toward the product in relation to the problem of product functionality, and consumer's affordability of the product. Our result suggests that the modified multi-attribute utility model may be better than the traditional multi-attribute utility model or the direct measurement method in estimation consumer's reservation price. The selection of the best estimation method is important because optimal bundle price is shown to depend entirely upon the estimated distribution of the reservation price.
