scholarly journals Optimal Software Feature-Limited Freemium Model Design: A New Consumer Learning Theoretical Framework

Mathematics ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 944
Author(s):  
Kang Li ◽  
Jingwei Zhang ◽  
Lunchuan Zhang
Keyword(s):  
Software Industry ◽  
Network Externality ◽  
Network Effect ◽  
Pricing Strategies ◽  
Consumer Learning ◽  
Prior Beliefs ◽  
Free Trial ◽  
Learning Framework ◽  
Strategy Design ◽  
New Consumer

The software industry is increasingly adopting a feature-limited freemium business model that combines “free” and “premium” contents in one product, to sell its products. How to determine the optimal product quality differences between the free and premium versions of software is a central business problem facing many software vendors. In this paper, we study the optimal feature-limited freemium software strategy design, as well as the associated pricing strategies based on consumer learning and network externality effects. We propose a new consumer learning framework induced by cross-module synergies that contains both direct and indirect learning processes. By employing a two-stage mathematical theoretical model and a numerical analysis method, we gained some insights regarding the feature-limited free trial strategy design and associated pricing strategies while considering the associated trade-off between the benefits and costs of the free trial strategy. In our modeling and numerical results, consumers’ prior beliefs about the quality of premium content before the free trial, network effect intensity, and indirect learning intensity were found to be three conditions that need to be studied to examine software vendors’ management decisions. For the software industry, the quality difference between free and premium functionality or the service and price strategy for a feature-limited free trial model can be designed while considering these factors, which will provide some useful guidelines for the industry.

scholarly journals Coordinating Demand and Supply for Crowd Logistics Platforms with Network Effect

2021 ◽  
Vol 2021 ◽  
pp. 1-14
Author(s):  
Wenjie Wang ◽  
Lei Xie
Keyword(s):  
Network Effects ◽  
Service Providers ◽  
Negative Impact ◽  
Positive Impact ◽  
Network Effect ◽  
Pricing Strategy ◽  
Pricing Strategies ◽  
Demand And Supply ◽  
Direct Network ◽  
Crowd Logistics

The crowd logistics platforms connect stochastic demand with uncertain delivery supply which is provided by independent service providers. Considering direct-network effects and cross-network effects between the demand and supply side, a dynamic surge pricing model for crowd logistics platforms is built. The pricing strategy is derived to coordinate the supply with demand to equilibrium. Furthermore, the pricing strategy minimizing cumulative delivery orders is analyzed. The numerical simulation results show that the dynamic surge pricing strategies can stimulate the uncertain delivery supply for maximizing platforms’ revenue. And, direct-network effects pose a positive impact on the dynamic surge pricing strategy. In contrast, the cross-network effects have a negative impact on the pricing strategy. However, direct-network effects and cross-network effects negatively influence platforms’ revenue.

Pricing Strategies of Unbundling and Mixed-Bundling in a Two-Sided Market Under Stochastic Demand

2020 ◽  
Vol 37 (03) ◽  
pp. 2050016
Author(s):  
Xiaogang Lin ◽  
Yong-Wu Zhou ◽  
Qiang Lin
Keyword(s):  
Stochastic Demand ◽  
Sharp Contrast ◽  
The Other ◽  
Network Effect ◽  
Pricing Strategy ◽  
Pricing Strategies ◽  
Royalty Rate ◽  
Mixed Bundling ◽  
The Impact ◽  
Two Sided Markets

We investigate the pricing strategies of unbundling and mixed-bundling for a firm that produces both a product and a compatible integrated content, respectively. The firm can be viewed as a two-sided transaction platform between sellers and customers, and decides whether to sell the product and the integrated content separately or jointly. Sellers develop independent content and are charged a per-unit royalty rate for each transaction on the platform, and customers are required to pay the prices for the product and the contents. With the consideration of stochastic demand, we study the impacts of cross-side network effect on the pricing strategies of unbundling and mixed-bundling, respectively. Moreover, we compare the impact of unbundling and mixed-bundling on the pricing strategy of the platform. Compared with no cross-side network effect, we show that the firm (with unbundling and mixed-bundling) need not subsidize customers and sellers in the presence of the effect under certain conditions, indicating that it can extract the most surplus from both sides to maximize the profit. This stands in sharp contrast to the finding of the literature on two-sided markets that the platform should subsidize one side of the market in order to make profit from the other side. Moreover, our result suggests that mixed-bundling can help the firm make more profit with fewer products by subsidizing one side of the market compared with the unbundling.

When Should a Monopolist Improve Quality in a Network Industry?

2013 ◽  
Vol 13 (1) ◽  
pp. 381-414
Author(s):  
Filomena Garcia
Keyword(s):  
Quality Improvement ◽  
Sufficient Conditions ◽  
Network Externality ◽  
Network Effect ◽  
Price Strategy ◽  
Improve Quality ◽  
Intrinsic Quality ◽  
Low Levels ◽  
Necessary And Sufficient ◽  
Network Good

AbstractThis article identifies the necessary and sufficient conditions under which a monopolist, producing a network good, benefits from introducing a higher quality in the market. It is shown that, if the network externality is higher than the intrinsic quality differential, quality improvement is not optimal. Also, we obtain that, for low levels of the network effect, the monopolist prefers not to cover the market, whereas for higher levels, optimal prices are such that all consumers buy one of the two qualities. Finally, there is an introductory price strategy which is optimal for the good that benefits from network externalities.

scholarly journals Mathematical Formulation and Analysis of the Optimal Launch Timing for Mobile Applications with Perceived Value and Network Effect

2017 ◽  
Vol 2017 ◽  
pp. 1-6
Author(s):  
Wei Li ◽  
Shu-gang Ma ◽  
Yan-peng He ◽  
Qiao-zhi An
Keyword(s):  
Mobile Apps ◽  
Mathematical Formulation ◽  
Perceived Value ◽  
Mobile App ◽  
Network Externality ◽  
Network Effect ◽  
Large Network ◽  
Digital Products ◽  
Two Factors ◽  
Important Challenge

Successive release is a common strategy adopted by mobile app providers, and determining the launch timing of new app versions presents an important challenge to these providers. Network effect and consumers’ perceived value are significant factors that influence the decisions of providers. By focusing on a monopoly market, we develop an optimization model that incorporates the two factors to determine the optimal launch timing of new versions of mobile apps. The model is solved by Lagrangian method, and the closed-form results indicate that the monopoly provider launches new app versions as soon as possible if the consumers’ perceived value is not sufficiently high. Otherwise, the new version is launched after (or before) the sales of its former version reach maturity if the network effect is (or not) sufficiently high. Moreover, the monopoly app vendor delays the launch of a new version when the consumers enjoy a large network externality; however, the same vendor accelerates the release of upgrades if the consumers have a high perceived value of the app. This paper presents a novel mathematical formulation to analyze the launching policy of digital products.

Hedonic and utilitarian perspective of mobile phones purchase intention

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kwame Owusu Kwateng ◽  
Amina Lambert Yobanta ◽  
Kofi Amanor
Keyword(s):  
Mobile Phone ◽  
Mobile Phones ◽  
Self Efficacy ◽  
Purchase Intentions ◽  
Network Externality ◽  
Network Effect ◽  
Research Approach ◽  
System Quality ◽  
Content Type ◽  
Brand Quality

PurposeThis study sought to examine the differential effect of brand quality and brand prestige on brand purchase intentions of mobile phones by students in Ghana. The study also examined the moderating role of network effect, system quality and self-efficacy on the relationship between brand quality and prestige on purchase intentions.Design/methodology/approachA quantitative research approach was adopted with data collection executed through the application of a questionnaire that was self-administered. A total of 518 completed questionnaires received from the respondents were used for the analysis. Statistical analysis was pursued using a sequential analytical procedure concentrating on purchasing intentions or actual purchases with respect to the choice of mobile phone brands.FindingsThe findings indicate that the network externality, system quality and self-efficacy can stimulate the choice of mobile phone brands. The moderating effect of network externality, self-efficacy and system quality were found to be mixed.Practical implicationsMobile phone companies should skew their investments toward improving the quality of the brand whiles developing effective marketing and differentiation strategies to enhance the brand image and create prestigious brands.Originality/valueThis paper provides researchers with a contemporary perspective toward understanding the key factors that guide students to have informed purchase intentions and enable mobile phone companies to evaluate their strategies

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