Economies of Phygitals: Bundling Strategies for Physical and Tokenized Digital Products

This research explores the emerging phenomenon of "Phygitals" - bundled products combining physical goods with their unique digital counterparts (tokenized digital products) in the context of bundling theory. We examine how superadditive utility created by the integration of physical and digital components affects optimal bundling strategies, considering the associated technical integration costs. Through analytical modeling, we demonstrate that producers can increase profits by introducing superadditivity in pure and mixed bundling strategies, despite integration costs. Our findings suggest that mixed bundling consistently outperforms other strategies, while the effectiveness of pure bundling versus pure components depends on the degree of superadditivity. We conceptualize different levels of Phygital functionality, ranging from basic authentication to advanced digital twin applications, and discuss real-world implementation examples. This study contributes to understanding the implications of the ontological reversal in Information Systems, specifically how producers can strategically bundle superadditive Phygitals for profit maximization.