Agent-based simulations of the software market under different pricing schemes for software-as-a-service and perpetual software

Authors:
Juthasit Rohitratana;Jörn Altmann
Affiliations:
Technology Management, Economics, and Policy Program, Department of Industrial Engineering, College of Engineering, Seoul National University, Seoul, South-Korea;Technology Management, Economics, and Policy Program, Department of Industrial Engineering, College of Engineering, Seoul National University, Seoul, South-Korea
Venue:
GECON'10 Proceedings of the 7th international conference on Economics of grids, clouds, systems, and services
Year:
2010

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Abstract

In this paper, we present agent-based simulations that model the interactions between software buyers and vendors in a software market that offers Software-as-a-Service (SaaS) and perpetual software (PS) licensing under different pricing schemes. In particular, scenarios are simulated, in which vendor agents dynamically set prices. Customer (or buyer) agents respond to these prices by selecting the software license scheme according to four fundamental criteria using Analytic Hierarchy Process (AHP) as decision support mechanism. These criteria relate to finance, software capability, organization, and vendor. Three pricing schemes are implemented for our simulations: derivativefollower (DF), demand-driven (DD), and competitor-oriented (CO). The results show that DD scheme is the most effective method but hard to implement since it requires perfect knowledge about market conditions. This result is supported through a price sensitivity analysis.