| A seller's problem of whether to sell two objects through separate auctions, or to bundle them before the auction, has been studied. Using a mathematically tractable model, it is shown that the bundling of objects creates a linkage between the price and the signals. As a result, the bidders bid more aggressively when the objects are bundled. That does not mean that a bundled auction is always better for the seller's revenue. Indeed, there is another effect which favors the bundled auction from the point of view of the expected revenue, if and only if the number of bidders is small. While this is the only effect present in an independent private values model, it does not vanish in a pure common value framework. We conclude that the bundled auction is unambiguously better than separate auctions when the number of bidders is small. |