The Effect of Quality Differentiation, Piracy and Product Sampling on Digital Product Pricing Strategies
- Topics:
- Pricing Strategy
- Tags:
- Business Operations,
- Corporate Law,
- Marketing,
- Marketing Research,
- Piracy,
- Pricing,
- Pricing Strategy,
- Social Science Electronic Publishing Inc.
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Overview: Piracy is an impending threat to the success of electronic markets for digital products. This paper develops a pricing model for vertically differentiated product markets such as online movies that are subject to piracy threats. Drawing upon pricing of experience goods, a model developed through a contract-theoretic lens and introduce piracy as competing contracts from a "tempting principal “ is described. It explains sampling as a complementary strategy to pricing and show that firms can mitigate losses from piracy by offering samples of the correct size. The results clearly demonstrate that the pricing and sampling strategies are very different in the case where consumers have underestimated a product's fit to their taste as opposed to when they overestimate a product's fit, read the article to get the details of the models for pricing strategy.
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Format: HTML | Date: Apr 2003 | Pages: 1
