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An incentive pricing with two types of qualities and users

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  • Choong-Young Jung

Abstract

This paper analyses quality discrimination when the monopolist provides two types of qualities for two-types of users, for example, in the software market. The users using software are confronted with two types of quality in using the software: one is related to learning, while the other is operation. In addition, the users are discriminated by the frequency of utilization for software, for example, low-demand and high-demand users. In this paper, the characteristics for bi-directional quality distortion in both learning quality and operation quality are analysed. It is shown that the distortion can occur both for low demanders and for high demanders. Finally, from public policy, a subsidy mechanism is introduced.

Suggested Citation

  • Choong-Young Jung, 2001. "An incentive pricing with two types of qualities and users," International Economic Journal, Taylor & Francis Journals, vol. 18(4), pages 491-504.
    • Handle: RePEc:taf:intecj:v:18:y:2001:i:4:p:491-504
    DOI: 10.1080/1016873042000299954
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    More about this item

    Keywords

    Quality distortion; operation quality; learning quality; subsidy; JEL Classification: D4; D5; D8; L1;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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