Nonlinear Pricing of Information Goods PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Nonlinear Pricing of Information Goods PDF full book. Access full book title Nonlinear Pricing of Information Goods by Arun Sundararajan. Download full books in PDF and EPUB format.
Author: Arun Sundararajan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This paper analyzes optimal pricing for information goods under incomplete information, when both unlimited-usage (fixed-fee) pricing and usage-based pricing are feasible, and administering usage-based pricing may involve transaction costs. It is shown that offering fixed-fee pricing in addition to a non-linear usage-based pricing scheme is always profit-improving in the presence of any non-zero transaction costs, and there may be markets in which a pure fixed-fee is optimal. This implies that the optimal pricing strategy for information goods is almost never fully revealing. Moreover, it is proved that the optimal usage-based pricing schedule is independent of the value of the fixed-fee, a result that simplifies the simultaneous design of pricing schedules considerably, and provides a simple procedure for determining the optimal combination of fixed-fee and non-linear usage-based pricing. The introduction of fixed-fee pricing is shown to increase both consumer surplus and total surplus. The differential effects of setup costs, fixed transaction costs and variable transaction costs on pricing policy are described. These results suggests a number of managerial guidelines for designing pricing schedules. For instance, in nascent information markets, firms may profit from low fixed-fee penetration pricing, but as these markets mature, the optimal pricing mix should expand to include a wider range of usage-based pricing options. The extent of minimum fees, quantity discounts and adoption levels across the different pricing schemes are characterized, strategic pricing responses to changes in market characteristics are described, and the implications of the paper's results for bundling and vertical differentiation of information goods are discussed.
Author: Arun Sundararajan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This paper analyzes optimal pricing for information goods under incomplete information, when both unlimited-usage (fixed-fee) pricing and usage-based pricing are feasible, and administering usage-based pricing may involve transaction costs. It is shown that offering fixed-fee pricing in addition to a non-linear usage-based pricing scheme is always profit-improving in the presence of any non-zero transaction costs, and there may be markets in which a pure fixed-fee is optimal. This implies that the optimal pricing strategy for information goods is almost never fully revealing. Moreover, it is proved that the optimal usage-based pricing schedule is independent of the value of the fixed-fee, a result that simplifies the simultaneous design of pricing schedules considerably, and provides a simple procedure for determining the optimal combination of fixed-fee and non-linear usage-based pricing. The introduction of fixed-fee pricing is shown to increase both consumer surplus and total surplus. The differential effects of setup costs, fixed transaction costs and variable transaction costs on pricing policy are described. These results suggests a number of managerial guidelines for designing pricing schedules. For instance, in nascent information markets, firms may profit from low fixed-fee penetration pricing, but as these markets mature, the optimal pricing mix should expand to include a wider range of usage-based pricing options. The extent of minimum fees, quantity discounts and adoption levels across the different pricing schemes are characterized, strategic pricing responses to changes in market characteristics are described, and the implications of the paper's results for bundling and vertical differentiation of information goods are discussed.
Author: Robert B. Wilson
Publisher: Oxford University Press, USA
ISBN: 9780195115826
Category : Business & Economics
Languages : en
Pages : 446
Get Book Here
Book Description
What do phone rates, frequent flyer programs, and railroad tariffs all have in common? They are all examples of nonlinear pricing. Pricing is nonlinear when it is not strictly proportional to the quantity purchased. The Electric Power Research Institute has commissioned Robert Wilson to review the various facets of nonlinear pricing. The work starts with a general non-mathematical discussion, followed by a more technical presentation intended for readers with a fairly advanced background. Thorough and detailed, this study has ample examples of case studies from a variety of industries.
Author: Atanu Lahiri
Publisher:
ISBN:
Category : Information services
Languages : en
Pages : 250
Get Book Here
Book Description
"This dissertation consists of three essays that examine, in three specific contexts, issues related to pricing of information goods and services. As the ability to measure technology resource usage gets easier with increased connectivity, the question whether a technology resource should be priced by the amount of the resource used or by the particular application of the resource has become an important question. In the first essay, this question is examined in the context of pricing of wireless services: should the price be based on the application, e.g., voice, multimedia messages, short messages, or should it be based on the traffic generated? Contrary to the prevailing opinion that hold that consumers prefer pricing based on traffic alone and carriers prefer application-based discrimination, I show that in some instances consumers will prefer application-based discrimination, and that in some carriers will not prefer such discrimination. The first essay uses a deterministic model to analyze the impact of application-based pricing. However, deterministic models do not explain some other important pricing issues such as those related to the commonly seen "Fixed Up To" (FUT) tariff. FUT tariffs are made up of three parts: a monthly subscription fee, an included allowance (also called the usage-limit), and an over-limit rate that applies to consumptions in excess of the usage-limit. Using a stochastic model, I develop a closed-form expression for the utility offered by a FUT pricing plan. I then examine the monopolists' tariff design problem in which heterogeneous consumers are offered a menu of FUT plans. I examine both forms of consumer heterogeneity, the heterogeneity in the frequency of use and that in the value obtained per use. I find that FUT tariffs lead to higher profits than do other two-part or nonlinear tariffs when consumers are heterogeneous. I also show that, contrary to the findings in the literature on nonlinear pricing, there are situations in which it is optimal for the carrier to serve both "high" and "low" type consumers regardless of their relative sizes. While the first two essays examine pricing of information services, the final essay focuses on pricing of information goods in the context of software security and patching. Software manufacturers provide "patches" to fix security vulnerabilities in their products and to distribute functionality enhancements. Moreover, these days software manufacturers have the ability to restrict the distribution of their patches to legal users only -- by doing do so they can reduce the incentive to pirate. However, not distributing security patches to pirates or illegal users leads to significant negative network effects, which lowers the legal users' willingness-to-pay for the product. Likewise, not only distributing functionality patches lowers the value of the pirated product but it also leads to a reduced user base and a lower positive network effect. In this essay I analyze these trade-offs and explain how different patch distribution strategies impact the equilibrium demand and profit of a monopolist. I explain how the consumer heterogeneity in piracy costs impacts the relative attractiveness of different strategies. Further, contrary to the prevailing wisdom on positive network effects, I show that supporting pirates with patches is not the best option when the positive network effect is very strong. I also explore the possibility that a software manufacturer may make certain patches available for a price, and show that such patch-pricing is effective only if consumers are heterogeneous with regard to their piracy costs."--Leaves v-vi.
Author: Dawen Meng
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
Get Book Here
Book Description
We study a nonlinear pricing problem of experience goods in dynamic environments where consumers' private information evolves stochastically over time, and their present types and/or quitting costs are affected by their past consumptions. Our model sheds some light on the pricing of addictive goods. Also, we provide a new ironing technique to meet the dynamic implementability condition. In standard contract model, to guarantee the static implementability condition, the principal needs to set an allocation monotonic in the agent's type. If the contract obtained from the relaxed problem is not everywhere monotonic, a horizontal ironing technique is adopted to revise it and a contract with bunching intervals is thus obtained. In our dynamic setup, however, monotonic condition is not sufficient for implementability. The slope of allocation with respect to type needs to be larger than a positive number. So, we use a sloping ironing technique to obtain a perfect sorting contract. Moreover, consumers in this paper are assumed to be distributed over a network. In contrast to the existing literatures of network game, we focus on a principal-agent model on the network/graph. We construct a new measure for identifying the key player with respect to quality. This measure takes into account both the prominence of actors inside a network and asymmetric information between the principal and agents.
Author: Ke-Wei Huang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
In this paper we analyze a model of usage pricing for digital products with discontinuous supply functions, which characterizes a number of information technology-based products and services for which variable increases in demand are fulfilled by the addition of "blocks" of computing or network infrastructure. Such goods are often modeled as information goods with zero variable costs; in fact, the actual cost structure resembles a mixture of positive periodic fixed costs and zero marginal costs. This paper discusses the properties of a general solution for the optimal nonlinear pricing of such digital goods. We show that the discontinuous cost structure can be accrued as a virtual constant variable cost. This general solution is applied to solve two related extensions. First, this paper investigates the optimal technology capacity planning when the cost function is both discontinuous and declining over time. Second, we characterize the optimal costing for the discontinuous supply when it is shared by several business profit centers. Our finding suggests that the widely adopted full-cost-recovery policies are typically suboptimal.
Author: Vithala R. Rao
Publisher: Edward Elgar Publishing
ISBN: 1848447442
Category : Business & Economics
Languages : en
Pages : 617
Get Book Here
Book Description
Pricing is an essential aspect of the marketing mix for brands and products. Further, pricing research in marketing is interdisciplinary, utilizing economic and psychological concepts with special emphasis on measurement and estimation. This unique Handbook provides current knowledge of pricing in a single, authoritative volume and brings together new cutting-edge research by established marketing scholars on a range of topics in the area. The environment in which pricing decisions and transactions are implemented has changed dramatically, mainly due to the advent of the Internet and the practices of advance selling and yield management. Over the years, marketing scholars have incorporated developments in game theory and microeconomics, behavioral decision theory, psychological and social dimensions and newer market mechanisms of auctions in their contributions to pricing research. These chapters, specifically written for this Handbook, cover these various developments and concepts as applied to tackling pricing problems. Academics and doctoral students in marketing and applied economics, as well as pricing-focused business practitioners and consultants, will appreciate the state-of-the-art research herein.
Author: Sridhar Balasubramanian
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
We analyze two pricing mechanisms for information goods selling, where an up-front payment allows unrestricted use by the consumer, and pay per-use pricing where the payments are tailored to the consumer's usage patterns. We analytically model these pricing mechanisms in a market where consumers differ in terms of usage frequency and utility-per-use. When a monopolist employs each mechanism independently, we demonstrate that pay-per-use pricing generally yields higher profits than selling, provided the transaction cost associated with the former is not too high. We then show that pay-per-use yields higher profits than selling when usage frequency is uncertain, whereas selling yields higher profits when utility-per-use is uncertain. We then analyze a duopoly and demonstrate that, in the only non-zero pricing equilibrium, one duopolist employs selling and the other employs pay-per-use. Here, the findings from the monopoly case are reversed and selling always yields higher profits than pay-per-use. Further, we demonstrate that as the transaction cost associated with pay-per-use increases, the profits of both duopolists can increase. If an upgrade is to be offered later, we show that if consumers are myopic, the pay-per-use mechanism performs better in a monopoly, and selling performs better in a duopoly. Finally, we model the scenario where competing, vertically differentiated firms can choose endogenously between the two pricing mechanisms and demonstrate how the firms move from each offering both mechanisms when the transaction cost associated with pay-per-use is low to each offering only selling when this cost is very high.
Author: Strader, Troy J.
Publisher: IGI Global
ISBN: 1616928794
Category : Technology & Engineering
Languages : en
Pages : 316
Get Book Here
Book Description
"This book covers a wide range of digital product management issues and offers some insight into real-world practice and research findings on the technical, operational, and strategic challenges that face digital product managers and researchers now and in the next several decades"--Provided by publisher.
Author: Hannes Werthner
Publisher: Springer Science & Business Media
ISBN: 3709162130
Category : Computers
Languages : en
Pages : 236
Get Book Here
Book Description
Although only a few years old, electronic commerce offers new ways of doing business that no business can afford to ignore. This book is a collection of selected contributions from renowned researchers who specialize in the various facets of electronic commerce, namely economics, finance, information technology, and education. The basic goal is to give an overview of some of the most relevant topics in E-Commerce.
Author: Paul P Wang
Publisher: World Scientific
ISBN: 9814474487
Category :
Languages : en
Pages : 1709
Get Book Here
Book Description
This proceeding contains the cutting-edge research results in information science and technology, and their related technology. Recent scientific breakthroughs such as invisibility cloak and meta-materials, data mining techniques, advanced game playing in artificial intelligence, nano-technology, unlikely event probability, and fuzzy logic reasoning are just a few outstanding examples. Walter Freeman's 80th birthday celebration is another highlight of this proceedings, because this major event is attended by many leading scientists from around the world. Key speakers include Charles Falco, Water Freeman, Thomas Huang, Meyya Meyyappan, Lotfi Zadeh, Bernette Bouchon Meunier, Heather Carlson, Ling Guan, Etienne Kerre and John Mordes.
