Use of Pricing Schemes for Differentiating Information Goods

Information goods vendors offer different pricing schemes such as per user pricing and site licensing. Why do competing sellers adopt different pricing schemes for the same information good? Pricing schemes affect buyers' usage levels and thus the revenue generated from different segments of buyers. This can allow a duopoly to differentiate themselves by offering different pricing schemes. Such strategic use of pricing schemes can allow undifferentiated sellers to earn substantial profits in a friction-free market for a commoditized information good. These conditions would otherwise lead to the Bertrand equilibrium and zero profits. We show that the strategy of adopting asymmetric pricing schemes can be a Nash equilibrium for information goods with negligible marginal costs of production. We extend our model to the case of information goods that are horizontally differentiated and show that sellers will offer a single pricing scheme that is different from its competitor when the ...

• Type: Journal
• Year: 2010
• Where: ISR
• Authors: Vidyanand Choudhary
• Keywords: Asymmetric Pricing Schemes, Distributed And Parallel Computing, ISR 2010, Multimedia, Multiple Pricing Schemes, Pricing Schemes