Optimal pricing for web search engines

Authors:
Xun Liang;Yang-Bo He
Affiliations:
Institute of Computer Science and Technology, Peking University, Beijing, China;Institute of Computer Science and Technology, Peking University, Beijing, China
Venue:
WINE'05 Proceedings of the First international conference on Internet and Network Economics
Year:
2005

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Abstract

The research and developments on web search engines have been raised to be one of the hottest topics since the popular usage of the internet. Accordingly, how to price the software becomes an important problem and is still unsolved with satisfactions. Using the Principle-Agent method in economics, the pricing model for web search engines based on the theory of Brown Motion with drifts is established. The stopping time is defined for the model, and the expected benefit of the web-search-engine provider over the rental horizon is derived, with a special case for the outright sale. By maximizing the benefit, the optimal price for the outright sale, the optimal monthly rental and the optimal selling price after renting the search engine for a period of time are discussed. Finally, given sets of parameters, simulations are implemented, and the results show that the optimal prices are reasonable.