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Dynamic pricing models for ERP systems under network externality

Author

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  • Hajji, Adnéne
  • Pellerin, Robert
  • Léger, Pierre-Majorique
  • Gharbi, Ali
  • Babin, Gilbert

Abstract

Enterprise Resource Planning (ERP) systems vendors face great challenges to enhance their market position and maximize their profits. Being able to simultaneously predict the diffusion of an ERP and to determine the right price to charge to a customer is a complex task. Earlier work has demonstrated evidence of network effect in the diffusion of ERP software in industries. In light of this evidence, we investigate in this paper the benefit of a dynamic pricing strategy for ERP systems vendors in a business network governed by a quantitative diffusion model. Based on a real scenario in the automotive industry, those quantitative models are integrated into a simulation-based optimization approach to tackle the problem. Our findings are promising and establish the foundation of a powerful decision support tool for ERP systems vendors.

Suggested Citation

  • Hajji, Adnéne & Pellerin, Robert & Léger, Pierre-Majorique & Gharbi, Ali & Babin, Gilbert, 2012. "Dynamic pricing models for ERP systems under network externality," International Journal of Production Economics, Elsevier, vol. 135(2), pages 708-715.
    • Handle: RePEc:eee:proeco:v:135:y:2012:i:2:p:708-715
    DOI: 10.1016/j.ijpe.2011.10.004
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    References listed on IDEAS

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    1. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    2. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    3. Anna Karpowicz & Krzysztof Szajowski, 2007. "Double optimal stopping times and dynamic pricing problem: description of the mathematical model," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 66(2), pages 235-253, October.
    4. Sonja Lehmann & Peter Buxmann, 2009. "Pricing Strategies of Software Vendors," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 1(6), pages 452-462, December.
    5. Monideepa Tarafdar & Rahul K. Roy, 2003. "Analyzing the Adoption of Enterprise Resource Planning Systems in Indian Organizations: A Process Framework," Journal of Global Information Technology Management, Taylor & Francis Journals, vol. 6(1), pages 21-51, January.
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    Cited by:

    1. Yi, Yuyin & Yang, Haishen, 2017. "Wholesale pricing and evolutionary stable strategies of retailers under network externality," European Journal of Operational Research, Elsevier, vol. 259(1), pages 37-47.
    2. Pazoki, Mostafa & Samarghandi, Hamed, 2021. "Word-Of-Mouth and estimating demand based on network structure and epidemic models," European Journal of Operational Research, Elsevier, vol. 291(1), pages 323-334.
    3. Li, Minqiang & Feng, Haiyang & Chen, Fuzan & Kou, Jisong, 2013. "Numerical investigation on mixed bundling and pricing of information products," International Journal of Production Economics, Elsevier, vol. 144(2), pages 560-571.
    4. Choi, Tsan-Ming & Chow, Pui-Sze & Xiao, Tiaojun, 2012. "Electronic price-testing scheme for fashion retailing with information updating," International Journal of Production Economics, Elsevier, vol. 140(1), pages 396-406.
    5. Wenzhu Zhang & Yue Dai & Lin Tian, 2021. "Pricing strategies for competitive firms with indirect network effects," Flexible Services and Manufacturing Journal, Springer, vol. 33(2), pages 547-581, June.
    6. Hajji, Adnène & Pellerin, Robert & Gharbi, Ali & Léger, Pierre Majorique & Babin, Gilbert, 2016. "Toward valuable prediction of ERP diffusion in North American automotive industry: A simulation based approach," International Journal of Production Economics, Elsevier, vol. 175(C), pages 61-70.
    7. Chou, Yen-Chun & Hao-Chun Chuang, Howard & Shao, Benjamin B.M., 2014. "The impacts of information technology on total factor productivity: A look at externalities and innovations," International Journal of Production Economics, Elsevier, vol. 158(C), pages 290-299.

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