Application of complex adaptive systems to pricing of reproducible information goods

  • Authors:

  • Moutaz Khouja;Mirsad Hadzikadic;Hari K. Rajagopalan;Li-Shiang Tsay

  • Affiliations:

  • Business Information Systems and Operations Management Department, The Belk College of Business Administration, The University of North Carolina at Charlotte, Charlotte, NC 28223, United States;College of Information Technology, The University of North Carolina at Charlotte, Charlotte, NC 28223, United States;School of Business, Francis Marion University, Florence, SC 29501, United States;Department of Computer Science, Hampton University, Hampton, Virginia 23668, United States

  • Venue:
  • Decision Support Systems
  • Year:
  • 2008

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Abstract

Piracy of copyrighted information goods such as computer software, music recordings, and movies has received increased attention in the literature. Much of this research relied on mathematical modeling to analyze pricing policies, protection against piracy, and government policies. We use complex adaptive systems as an alternative methodology to analyze pricing decisions in an industry with products which can be pirated. This approach has been previously applied to pricing and can capture some aspects of the problem which are difficult to analyze using traditional mathematical modeling. The results indicate that advances in technology make a skimming strategy the least preferable approach for producers. Further, improvements in technology, more specifically data communications and the Internet, will erode the profitability of a skimming strategy. The analysis also indicates that complex adaptive systems may provide a useful method for analyzing problems in which interactions between participants in the systems, i.e. consumers, sellers, and regulating agencies, are important in determining the behavior of the system.