Designing Free Sofware for Marketing: A Game Theoretic Approach
AbstractWe develop a vertical differentiation game-theoretic model that addresses the issue of designing free software samples for attaining follow-on sales. When software samples are akin to durable goods, a Monopolist giving a free sample away is likely to engender the cannibalization of sales of its commercial product. We analyze the optimal design of free software according to two characteristics: the trial time allotted for sampling (potentially renewable) and the proportion of features included in the sample. We find that these two dimensions play different roles whenever the software product is innovative or standard. We draw implications regarding the effectiveness of marketing strategies depending on the type of software product offered by a Monopolist.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Game Theory and Information with number 0311003.
Length: 27 pages
Date of creation: 06 Nov 2003
Date of revision:
Note: Type of Document - pdf; prepared on Win2000; to print on HP LaserJet 4 plus; pages: 27; figures: Embedded
Contact details of provider:
Web page: http://188.8.131.52
Vertical Differentiation; Monopolist; Free sample; Software; Durable goods; Sales Cannibalization; Optimal Design.;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-09 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Takeyama, Lisa N, 2002. "Strategic Vertical Differentiation and Durable Goods Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 43-56, March.
- Ernan Haruvy & Ashutosh Prasad, 2001. "Optimal freeware quality in the presence of network externalities: an evolutionary game theoretical approach," Journal of Evolutionary Economics, Springer, vol. 11(2), pages 231-248.
- Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.