Pricing of Information Products on Online Servers: Issues, Models, and Analysis
Online information servers that provide access to diverse databases where users can search for, browse through, and download the information they need have been rapidly increasing in number in the past few years. Online vendors have traditionally charged users for information on the based on the length of the time they were connected to the databases. With hardware and software advances, many online servers have recently started changing their pricing strategies to search-based and/or subscription-fee pricing. This paper examines the various issues involved in pricing these information products, and presents an economic approach to analyze conditions under which the various pricing schemes may prove optimal for the online servers. Our results show that the variation in consumer expertise and valuation of information affects the choice of a pricing strategy by the server. We present general conditions under which subscription-fee pricing is optimal even when consumer demand is inelastic. We also find that, given the cost structures characterizing the market, undifferentiated online servers can compete and coexist in the market each making positive profits. We show that in a competitive setting an increase in costs of online servers can sometimes benefit them by enabling them to differentiate themselves. Our results offer insights into the trends in pricing strategies and may provide an explanation as to why many servers may persist with connect-time strategies.
Volume (Year): 48 (2002)
Issue (Month): 9 (September)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
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.:
- Shaler Stidham, 1992. "Pricing and Capacity Decisions for a Service Facility: Stability and Multiple Local Optima," Management Science, INFORMS, vol. 38(8), pages 1121-1139, August.
- Gupta, Alok & Stahl, Dale O. & Whinston, Andrew B., 1997.
"A stochastic equilibrium model of internet pricing,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 21(4-5), pages 697-722, May.
- Alok Gupta & Dale O. Stahl, 1996. "A Stochastic Equilibrium Model of Internet Pricing," CARE Working Papers 9604, The University of Texas at Austin, Center for Applied Research in Economics.
- Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 383-401.
- J. Christopher Westland, 1992. "Congestion and Network Externalities in the Short Run Pricing of Information System Services," Management Science, INFORMS, vol. 38(7), pages 992-1009, July.
- Fudenberg, Drew & Tirole, Jean, 1983. "Capital as a commitment: Strategic investment to deter mobility," Journal of Economic Theory, Elsevier, vol. 31(2), pages 227-250, December.
- Sanjeev Dewan & Haim Mendelson, 1990. "User Delay Costs and Internal Pricing for a Service Facility," Management Science, INFORMS, vol. 36(12), pages 1502-1517, December.
- Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
- Yannis Bakos & Erik Brynjolfsson, 1997. "Bundling Information Goods: Pricing, Profits and Efficiency," Working Paper Series 199, MIT Center for Coordination Science.
- Rajiv Dewan & Marshall Freimer & Abraham Seidmann, 2000. "Organizing Distribution Channels for Information Goods on the Internet," Management Science, INFORMS, vol. 46(4), pages 483-495, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:48:y:2002:i:9:p:1123-1142. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.