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Optimal pricing policy in the presence of positive and negative network effects

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Journal of Revenue and Pricing Management Aims and scope

A Correction to this article was published on 09 September 2023

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Abstract

We propose an optimal pricing model for products with both positive and negative network effects. A closed-form expression of the optimal pricing policy is derived under the assumption that the demand function is linear. When there are two customer types with different attitudes towards congestion, the monotonicity of the optimal price differs according to the price sensitivity of each customer type. We show that even if the number of customers who are averse to congestion increases, if the negative-type price sensitivity is low and the positive network effect is weak, increasing the optimal price will increase total profit.

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Acknowledgements

This work was supported by a JSPS Grant-in-Aid for Scientific Research (C) (Grant No. 20K04976).

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Authors and Affiliations

  1. Graduate School of Engineering, Kanagawa University, 3-27-1 Rokkakubashi, Kanagawa-ku, Yokohama, Kanagawa, 221-8686, Japan

    Nako Iwaji

  2. Faculty of Engineering, Kanagawa University, 3-27-1 Rokkakubashi, Kanagawa-ku, Yokohama, Kanagawa, 221-8686, Japan

    Kimitoshi Sato

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  1. Nako Iwaji
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  2. Kimitoshi Sato
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Correspondence to Kimitoshi Sato.

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The original online version of this article was revised: Modifications have been made in the Font size in the paragraph after equation 5 and before equation 11 and figures 1 and 2. Full information regarding the corrections made can be found in the correction for this article.

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Iwaji, N., Sato, K. Optimal pricing policy in the presence of positive and negative network effects. J Revenue Pricing Manag 23, 112–118 (2024). https://doi.org/10.1057/s41272-023-00437-7

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  • DOI: https://doi.org/10.1057/s41272-023-00437-7

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