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Dynamic pricing for information goods using revenue management and recommender systems

Author

Listed:
  • Hekmat Adelnia Najafabadi

    (Islamic Azad University)

  • Ahmadreza Shekarchizadeh

    (Islamic Azad University)

  • Akbar Nabiollahi

    (Islamic Azad University)

  • Naser Khani

    (Islamic Azad University)

  • Hamid Rastgari

    (Islamic Azad University)

Abstract

With the advent of the Internet and creation of information goods, the concept of price and pricing information goods has become one of the most interesting and innovative topics in information technology management and economics. In the cost structure of information goods, its reproduction cost is negligible compared to original version. Therefore, policies must be adopted to prorate the prime cost of the original version according to the demand for all reproduced copies. It means that based on the cost structure, market and the characteristics of information goods, the usual methods for pricing information products are not efficient and traditional pricing (cost plus profit), which is common way for most consumer and industrial goods, is not useful. In this paper, a model is proposed for dynamic pricing of information goods that adapts revenue management systems to create more profit for sellers and uses recommender systems to personalize prices which leads to customer welfare along with increasing profit. Economic analysis of the model by movie store datasets illustrates its desirable performance for increasing seller’s profit and customer’s welfare.

Suggested Citation

  • Hekmat Adelnia Najafabadi & Ahmadreza Shekarchizadeh & Akbar Nabiollahi & Naser Khani & Hamid Rastgari, 2022. "Dynamic pricing for information goods using revenue management and recommender systems," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 153-163, April.
  • Handle: RePEc:pal:jorapm:v:21:y:2022:i:2:d:10.1057_s41272-020-00276-w
    DOI: 10.1057/s41272-020-00276-w
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    References listed on IDEAS

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    1. B. Douglas Bernheim, 2009. "Behavioral Welfare Economics," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 267-319, 04-05.
    2. Roy Jones & Haim Mendelson, 2011. "Information Goods vs. Industrial Goods: Cost Structure and Competition," Management Science, INFORMS, vol. 57(1), pages 164-176, January.
    3. Alessandro Capocchi, 2019. "Economic Value and Revenue Management Systems," Springer Books, Springer, number 978-3-030-02417-8, December.
    4. Francisco Galera & Pedro Garcia-del-Barrio & Pedro Mendi, 2019. "Consumer surplus bias and the welfare effects of price discrimination," Journal of Regulatory Economics, Springer, vol. 55(1), pages 33-45, February.
    Full references (including those not matched with items on IDEAS)

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