Economic incentives to adopt electronic payment schemes under competition
Decision Support Systems
When Is Price Discrimination Profitable?
Management Science
Use of Pricing Schemes for Differentiating Information Goods
Information Systems Research
Joint Dynamic Pricing of Multiple Perishable Products Under Consumer Choice
Management Science
Why give away something for nothing? Investigating virtual goods pricing and permission strategies
ACM Transactions on Management Information Systems (TMIS)
Information Goods vs. Industrial Goods: Cost Structure and Competition
Management Science
Computers and Industrial Engineering
Revisiting the incentive to tolerate illegal distribution of software products
Decision Support Systems
The pricing model of cloud computing services
Proceedings of the 14th Annual International Conference on Electronic Commerce
Competitive implications of software open-sourcing
Decision Support Systems
Effects of Piracy on Quality of Information Goods
Management Science
Computers and Industrial Engineering
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This paper provides insights about when versioning is an optimal strategy for information goods. Our characterization of this class of goods is that variable costs are invariant with quality, including the special case of zero variable costs. Our analysis assumes a monopoly firm that has an existing product in the market and has an opportunity to segment the market by introducing additional lower-quality versions. We derive a simple decision rule for determining the optimality of versioning based on the solution to a single-product maximization problem. Versioning is optimal when the optimal market share of the lower-quality version, offered alone, is greater than the optimal market share of the high-quality version, offered alone. A firm can profitably employ versioning for an information good if it can design the lower quality in a way that, relative to their valuations for the high-end version, high-type consumers have a lower relative valuation for the lower quality than do low-type consumers. When variable costs increase, a firm that offered only one product version need not consider adding another version. When variable costs decrease, the firm should explore adding a lower-quality version.