Optimal pricing for information goods and complementary services in duopoly markets
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    Abstract:

    The optimal pricing strategy for information goods and complementary services has been a primary issue for providers of information goods in competitive markets. Most existing researches study pricing of only information goods without considering the subsequent services,or address the problem based on the assumption that the consumers have the same network effects. This paper studies the optimal pricing strategy with heterogeneous consumers and duopoly companies who provide information goods and complementary services. By analyzing four different equilibria,a game model with two types of strategies—the bundle pricing strategy and separate pricing strategy—is proposed to obtain optimal strategies for firms to maximize their profits. Meanwhile,a coefficient representing the strength of heterogeneous network effects is introduced into the Hotelling model to derive the demand function and the profit function of companies,and a two-stage Bertrand game is utilized to analyze the pricing competition. The analytic solutions for the duopoly’s optimal pricing together with their profits are computed by solving the proposed model. The numerical simulation illustrates how the market size and the market structure affect the prices of goods and services,market shares and total profits of the two companies,and how duopoly companies choose their different pricing strategies at different combinations of costs and market sizes.

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  • Online: April 22,2018
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