Unbundling of Industrial Systems

Abstract

The authors examine the bundling options of a firm that sells a multicomponent industrial system. A system is described by individual component attributes and by its “integration” and its “modularity.” Customers have heterogeneous preferences. Competing firms offer components that can be mixed and matched with the firm's components if it unbundles. If new systems added by unbundling are more modular or have a superior component, the market may grow. Growth is the key to making the unbundling option attractive.