IDEAS home Printed from https://ideas.repec.org/p/bgu/wpaper/0510.html
   My bibliography  Save this paper

Optimal Pricing In Non-Homogeneous Market With Network Externalities

Author

Listed:
  • Uriel Spiegel

    (Interdisciplinary Department of Social Sciences, Bar-Ilan University, and Visiting Professor, University of Pennsylvania)

  • Uri Ben-Zion

    (BGU)

  • Tchai Tavor

    (BGU)

Abstract

The paper analyzes the options open to monopoly firms that sell software or internet service. We consider customers who have different reservation prices that are rectangularly distributed. The monopoly in general undertakes price discrimination between customers by producing two versions of the product, basic and advanced, where a zero price is charged for the lower quality product (i.e., the free version). The monopoly may also sell advertising space to increase revenues but may lose those customers that are annoyed by being exposed to compulsory advertising. We analyze the situation where the monopoly has an incentive to increase its output due to the network externality and allow free of charge basic service.

Suggested Citation

  • Uriel Spiegel & Uri Ben-Zion & Tchai Tavor, 2005. "Optimal Pricing In Non-Homogeneous Market With Network Externalities," Working Papers 0510, Ben-Gurion University of the Negev, Department of Economics.
  • Handle: RePEc:bgu:wpaper:0510
    as

    Download full text from publisher

    File URL: http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/0510.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    2. Oz Shy & Jacques-Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 163-190, June.
    3. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    4. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    5. Gayer, Amit & Shy, Oz, 2003. "Copyright protection and hardware taxation," Information Economics and Policy, Elsevier, vol. 15(4), pages 467-483, December.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bgu:wpaper:0510. 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: (Aamer Abu-Qarn). General contact details of provider: http://edirc.repec.org/data/edbguil.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.