Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 167-191 |
| Number of pages | 25 |
| Journal | Journal of Management Information Systems |
| Volume | 24 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2007 |
| Externally published | Yes |
Fingerprint
Keywords
- versioning
- pricing
- information goods pricing
- economics of information systems
- customized bundling
- analytical modeling
Cite this
}
The optimal number of versions : why does goldilocks pricing work for information goods ? / HUI, Wan Yee Wendy; Yoo, Byungjoon; TAM, Kar Yan.
In: Journal of Management Information Systems, Vol. 24, No. 3, 2007, p. 167-191.Research output: Journal Publications › Journal Article (refereed) › Research › peer-review
TY - JOUR
T1 - The optimal number of versions : why does goldilocks pricing work for information goods ?
AU - HUI, Wan Yee Wendy
AU - Yoo, Byungjoon
AU - TAM, Kar Yan
PY - 2007
Y1 - 2007
N2 - The literature in general suggests that selling multiple versions is more profitable than selling only a single version. However, how many versions should be offered is not as clear. Classical pricing studies suggest providing as many versions as the number of customer types, whereas some studies in information systems suggest providing only one or two versions. In reality, firms typically provide more than one or two versions, such as three in the case of Goldilocks pricing. This study explains the discrepancies in these results and observations by showing that, although profit increases with more versions, the marginal benefit of an additional version decreases rapidly. Therefore, firms sell few versions even in the presence of very small versioning-related costs such as menu and cognitive costs. This study analyzes the effects of these costs, and shows that cognitive costs have more profound effects on versioning than menu costs.
AB - The literature in general suggests that selling multiple versions is more profitable than selling only a single version. However, how many versions should be offered is not as clear. Classical pricing studies suggest providing as many versions as the number of customer types, whereas some studies in information systems suggest providing only one or two versions. In reality, firms typically provide more than one or two versions, such as three in the case of Goldilocks pricing. This study explains the discrepancies in these results and observations by showing that, although profit increases with more versions, the marginal benefit of an additional version decreases rapidly. Therefore, firms sell few versions even in the presence of very small versioning-related costs such as menu and cognitive costs. This study analyzes the effects of these costs, and shows that cognitive costs have more profound effects on versioning than menu costs.
KW - versioning
KW - pricing
KW - information goods pricing
KW - economics of information systems
KW - customized bundling
KW - analytical modeling
UR - https://www.scopus.com/inward/record.uri?eid=2-s2.0-39749131065&doi=10.2753%2fMIS0742-1222240306&partnerID=40&md5=576351bcd0878e4c5d726fbcc6087a37
U2 - 10.2753/MIS0742-1222240306
DO - 10.2753/MIS0742-1222240306
M3 - Journal Article (refereed)
VL - 24
SP - 167
EP - 191
JO - Journal of Management Information Systems
JF - Journal of Management Information Systems
SN - 0742-1222
IS - 3
ER -