THE DEFENSE OF PRICE DISCRIMINATION IN NETWORK AND INFORMATION GOODS MARKETS

It is not uncommon that articles focused on consumer-price interaction in the network and information goods market swiftly condemn price discrimination as an obfuscation, on-purpose price complexity, or market failure. The reason is a general neoclassical rule of an efficient market where prices are set at marginal cost with no price discrimination. However, the matter is more complicated. This review provides authors an overview of why, where, and which type of price discrimination should be viewed by different optics. Goods such as software, cell carrier services, electronic newspapers subscription, electric energy supply, payment accounts, books, copyrighted content streaming, etc, cannot be treated like manufactured goods. The reasons are specific conditions – substantial and/or repeated fixed/sunk cost, economies of scale, and demand heterogeneity. Recognized economist W. J. Baumol described marginal cost set prices under these conditions as an ‘economic suicide’. Reviewed articles showed that firms are forced to adopt price discrimination in order to recover their costs and to serve more consumer segments. Reviewed authors provided facts to support the use of multipart tariffs, dynamic pricing, versioning, bundling, and Ramsey pricing. These conclusions are used for suggestions on how several studies of information and network goods should be modified. Modifications are related mostly to model assumptions and pricing conclusions. I argue that, in the case of information and network goods, there is justified price discrimination. Hence, there is a certain justified level of price complexity that has to be accepted and not taken as automated evidence of inefficiency, market power, and consumer exploitation.

Product Selling vs. Pay-Per-Use Service: A Strategic Analysis of Competing Business Models

We present a model that suggests possible explanations for the observed proliferation of “pay-per-use” (PPU) business models over the last two decades. Delivering “fractions” of a product as a service offers a cost advantage to customers with lower usage but requires extra delivery costs. Previous research focused on information goods (with negligible production costs) and predicted that PPU, when arising as a differentiation to selling in equilibrium, would fundamentally achieve lower profits than selling. We extend the theory by covering goods with any production cost in duopolistic competition. We show that PPU business models can be more profitable than selling (especially at midrange production costs), as long as their delivery costs are not too high, a requirement that is more easily fulfilled as new technologies reduce these costs. Moreover, if firms are imperfectly informed about their customers’ usage profiles, PPU’s effective pricing of customers’ varying usage offers an additional advantage over selling. This requires companies to employ accounting methods that do not inappropriately allocate production costs over stochastic usage levels. If PPU service provision suffers from queueing inefficiencies, this does not fundamentally change the relative profitability of the PPU and selling models, provided that PPU providers can attract sufficiently high demand to benefit from pooling economies. This paper was accepted by Charles Corbett, operations management.

Manufacturer’s “1-Up” from Used Games: Insights from the Secondhand Market for Video Games

In contrast to industries of other types of information goods, the video game industry still has a sizable secondhand market for games. This is particularly notable because some of the major gaming-console companies (e.g., Sony and Microsoft) actually possess the ability to annihilate the secondhand market altogether; it appears that those companies have given tacit approval to buying and selling used games. Naturally, the question is, what is the special ingredient in the gaming industry that gives a manufacturer incentive to keep a healthy secondhand market even when it has the technological means to shut it down? In this study, leveraging a game-theoretic model, we investigate the effect of gaming console on a manufacturer’s strategy in the presence of a secondhand market for games. We find that when the manufacturer offers a valuable console that provides utilities in addition to playing games, the secondhand market increases the manufacturer’s profit, and that is not at the cost of consumers; the consumers—as well as the society as a whole—also benefit from the secondhand market. This is in stark contrast with settings where there are no consoles involved or the consoles do not offer any intrinsic value; in such settings, the manufacturer would opt to shut down the secondhand market. In the case with a valuable console, however, the increasing appeal of the secondhand market to consumers may improve the manufacturer’s profit, consumer surplus, and social welfare, all at the same time. We discuss our findings along with managerial and welfare implications.

Utilization of a mobile phone application to increase access to sexual and reproductive health information, goods, and services among university students in Uganda

Background Innovations to increase access to sexual and reproductive health (SRH) information, goods, and services are needed, particularly in low-income settings. This study assessed the utilization of a mobile phone application (MPA) to increase access to SRH information, goods, and services among university students in Uganda. Methods We conducted a cross-sectional analysis of data from: (1) an endline survey performed as a consequence of a randomized controlled trial (RCT) of the effectiveness of the MPA, and (2) data from use of the MPA for accessing information, goods, and services over the 6-month time period of the RCT, obtained from in-MPA data collection service providers. We performed descriptive analysis of participant characteristics and their association with the utilization of the MPA using logistic regression; analyses of MPA use for accessing different types of information, goods, and services by gender; and analyses of functionality attributes of the MPA and related services. Results In the study population of young (median 22 years) predominantly female (61%) students, the utilization of the MPA by those who downloaded it was high (81% overall, 82% female, and 82% male). The most popular information portal was the frequently asked questions (71% utilization); the most popular goods were condoms for males (77% utilization) and sanitary pads for females (94% utilization); and the most popular service was HIV testing and counseling (60% utilization). The MPA demonstrated predominantly positive (responsiveness, non-distracting in-app advertisements, and ease of use) attributes. Conclusion A mobile phone app to increase access to SRH information, goods, and services among university students in Uganda demonstrated high utilization. The results of this study support ongoing and future technical improvement efforts and research on effectiveness, economic efficiency, and scalability, along the continuum of activities to scale this intervention in order to improve SRH in low-income settings. Trial Registration MUREC1/7 No. 07/05-18. Registered; June 29, 2018.

Prerequisites For The Establishment Of Transport And Logistics Centres On The Basis Of Railway Stations

Kazakh and foreign economists note that the decline in industrial and agricultural production, stagflation of the economy of the Republic of Kazakhstan in the post-crisis period require a deep analysis of the current situation and careful development of appropriate economic and managerial decisions. In these circumstances, it is necessary to find the most effective ways out of the crisis.It is obvious that it makes no sense for the Republic of Kazakhstan to fully follow the centuries-old path of becoming an industrially developed country. Without a doubt, the modern market economic system should serve as a reference point, which, in addition to free competition, also has numerous internal and external levers of management and regulation, including state ones, which in their essence suppress bursts of fluctuations in the market element and allow using all the advantages and advantages of market relations.One of these ways in the market economy, according to many experts, with whom it is difficult to disagree, is the design of logistics models, the formation, implementation and organization of the rational functioning of logistics services, structures, management systems at the on-farm, industrial (micro logistics) and macroeconomic, international, national, regional (macro logistics) levels, the widespread development and application of logistics methodology, technologies and tools, creation of logistics management systems that differ in their functional purpose and organizational and economic level.When integrating the economy of the Republic of Kazakhstan into the world economic community, there is an increasing need to create reliable, dynamic and efficient domestic logistics management systems that could optimally interact with the national logistics systems of foreign countries in international economic and logistics processes at the macro - and micro logistic levels.These logistics systems are designed to facilitate the rational movement of any flows of information, goods, capital and people both within the country and across the borders of States, taking into account the national peculiarities of customs clearance and support.

Mundane work for utopian ends: Freeing digital materials in peer production

This article studies the online encyclopedia Wikipedia as a core example of the storage and sharing of commons-based digital materials. It focuses on the voluntary, day-to-day activities of its editors as they gather and transform digital information goods that are made available free of charge. Using the notion of articulation work, I stress the effort that goes into accommodating the engagement with the encyclopedia within the contributors’ media-suffused daily routines. Then, the article discusses the typical practices of transcribing, republishing, and relicensing through which the transition from non-free ownership to freely shared property is brought about. Finally, the freedom that is inherent in the modification of the legal status of ideas and artifacts and their public circulation requires us to interrogate the ethical implications of the digital commons collected and spread by Wikipedians.

Competitive Entry of Information Goods Under Quality Uncertainty

When confronted with a new product, consumers often find it difficult to predict how it will perform, and such uncertainty reduces consumers’ willingness to adopt the product. In this paper, we consider a market whereby consumers decide when and which product to buy, given that they know the product quality of the incumbent but are uncertain about that of the entrant. We investigate how consumer uncertainty about product quality affects firms’ behavior-based pricing and customer acquisition and retention dynamics. Using a two-period vertical model, we find that, under high-end encroachment, an increase in consumer uncertainty reduces the entrant’s profit and hurts the incumbent’s profit when the quality differential between the products is relatively small, whereas, under low-end encroachment, increasing uncertainty not only benefits the incumbent but also can favor the entrant. An important implication for entrants is that the marketing activities, which aim to reduce consumer uncertainty about product functionalities, may fail to improve profitability. We also find that the entrant lowers the price for uninformed customers and raises the price for repeat buyers under high-end encroachment but lowers the price for all customers under low-end encroachment. We further examine the subsidy strategy and show that, when the entrant’s product has a significant quality advantage and consumer uncertainty is high but not very high, the optimal strategy for the entrant is to acquire all consumers who do not buy from the incumbent by providing subsidies and to drop the low-valuation customers by means of a high price after their uncertainty is resolved.