Short Biography:Sandun Perera is an Associate Professor of Business Analytics and Operations in the College of Business at the Universityof Nevada, Reno. He received his Ph.D. in Operations Management as well as an MBA and an M.S. in Supply Chain Management from the Jindal School of Managementat the University of Texas at Dallas. He also holds a Ph.D. in Financial Mathematics, and Master of Science degrees in Statistics and Applied Mathematics, and in Mathematics from Florida Atlantic University. He earned hisB.S. in Finance, Business, and Computational Mathematics with first-classhonors from the University of Colombo, Sri Lanka. His research broadly focuseson Supply Chain Management, Disruptive Technologies in Operations Management,Healthcare Operations Management, and interfaces between Operations and otherfunctional areas in business. Sandun has worked collaboratively withmultinational technology companies, retailers, hospitals, blood banks, and pharmaceutical companies for his research and his work has appeared in numerousjournals including Financial Times’ Top 50 Journals:https://www.sandunperera.com/research.html. He currently serves as a senioreditor for the Production and Operations Management Journal and an associateeditor for Transportation Research Part E: Logistics and Transportation Review.He is also a board member of the Production and Operations Management Society.

Abstract:Consumers perceive prices as unfair when afirm's profit margin is disproportionately high relative to the consumersurplus. When purchasing products at unfair prices, the inequity-averseconsumers incur psychological disutility. This paper studies the impact ofconsumer inequity aversion on a firm's optimal product bundling and pricingstrategy, as well as its implications for consumer surplus and social welfare.Our analysis yields several interesting findings. First, although the extantbundling literature posits that bundling high-cost products would bedetrimental to a firm, we show this does not necessarily hold when consumersexhibit a fairly high degree of inequity aversion. Thus, our study reveals anew rationale for bundling in enabling a high-cost firm to mitigate consumers'perceptions of price unfairness and increase their willingness to pay. Second,while intuition suggests that a firm should lower the price with the increaseof consumer inequity aversion, our results reveal that the contrary mighthappen, for a firm serving heterogeneous market segments. Third, in contrast tothe popular viewpoint, in both industry and academia, that bundling enables afirm to effectively extract surpluses at the expense of consumers, we find thatthe use of bundling can improve inequity-averse consumers' welfare. Ourfindings therefore caution the regulators that the potential legislative bansagainst bundling in the various industries might not be advisable. Further, weexamine the implications of cost disclosure and find that cost disclosuredecisions by a firm and a social planner often align and can improve both thefirm's profit and social welfare. In scenarios where cost disclosure increasessocial welfare at the expense of a firm, our findings suggest that apolicymaker could mandate the firm to disclose the cost.