Abstract
Firms producing information goods that exhibit a network externality often adopt an introductory pricing strategy. The argument is that to secure a critical mass or installed base of customers, a firm sets price lower than marginal cost at the time of introducing an information good. A salient example is the web browser, Navigator, which could be freely downloaded in the early-1990s. During this period, economists identified the existence of introductory pricing strategies by firms within information good markets.1 For example, (1996) develop a monopoly information good producer model to consider profit maximizing price setting behavior. Low initial prices are set, with price increasing later when a learning-by-doing network externality adds further benefit attracting new consumers to the market. Additionally, (1999), using a dynamic model, show that duopoly firms may choose an introductory pricing strategy.
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bensaid B, Lense JP (1996) Dynamic monopoly pricing with network externalities. International Journal of Industrial Organization 14: 837–55
Economides N, Himmelberg C (1995) Critical mass and network evolution in telecommunications. In: Broch GW (ed) Toward a competitive telecommunications industry: Selected papers from the 1994 Telecommunications Policy Research Conference. University of Maryland, College Park, pp 31–42
Coase RH (1972) Durability and monopoly. Journal of Law and Economics 15: 143–9
Cabrai LMB, Salant DJ, Woroch GA (1999) Monopoly pricing with network externalities. International Journal of Industrial Organization 17: 199–214
Katz M, Shapiro C (1985) Network externalities, competition, and compatibility. American Economic Review 75(3): 424–40
Rohlfs J (1974) A theory of interdependent demand for communications service. Bell Journal of Economics and Management Science 5(1): 16–37
Shapiro C, Varian HR (1999) Information rules: A strategic guide to network economy. Harvard Business School Press, Boston
Shy O (2001) The economics of network industries. Cambridge University Press, Cambridge
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2004 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Sohn, YY. (2004). Asymmetry in Pricing Information Goods. In: Cooper, R., Madden, G. (eds) Frontiers of Broadband, Electronic and Mobile Commerce. Contributions to Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2676-0_12
Download citation
DOI: https://doi.org/10.1007/978-3-7908-2676-0_12
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-7908-0087-6
Online ISBN: 978-3-7908-2676-0
eBook Packages: Springer Book Archive