Management Science
Information rules: a strategic guide to the network economy
Information rules: a strategic guide to the network economy
Automated strategy searches in an electronic goods market: learning and complex price schedules
Proceedings of the 1st ACM conference on Electronic commerce
Bundling Information Goods: Pricing, Profits, and Efficiency
Management Science
Internet Publishing and beyond: The Economics of Digital Information and Intellectual Property
Internet Publishing and beyond: The Economics of Digital Information and Intellectual Property
Consumer Addressability and Customized Pricing
Marketing Science
Economics of an Information Intermediary with Aggregation Benefits
Information Systems Research
Bundling Information Goods of Decreasing Value
Management Science
Consumers Prefer Bundled Add-Ins
Journal of Management Information Systems
Information Goods and Vertical Differentiation
Journal of Management Information Systems
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The literature in general suggests that selling multiple versions is more profitable than selling only a single version. However, how many versions should be offered is not as clear. Classical pricing studies suggest providing as many versions as the number of customer types, whereas some studies in information systems suggest providing only one or two versions. In reality, firms typically provide more than one or two versions, such as three in the case of Goldilocks pricing. This study explains the discrepancies in these results and observations by showing that, although profit increases with more versions, the marginal benefit of an additional version decreases rapidly. Therefore, firms sell few versions even in the presence of very small versioning-related costs such as menu and cognitive costs. This study analyzes the effects of these costs, and shows that cognitive costs have more profound effects on versioning than menu costs.