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Confessions of an Internet Monopolist: Demand Estimation for a Versioned Information Good


  • Chappell, Henry
  • Guimaraes, Paulo
  • Ozturk, Orgul


We investigate profit-maximizing versioning plans for an information goods monopolist. The analysis employs data obtained from a web-based field experiment in which potential buyers were offered information goods in varied price-quality configurations. Maximum simulated likelihood (MSL) methods are used to estimate parameters describing the distribution of utility function parameters across potential buyers of the good. The resulting estimates are used to examine the impact of versioning on seller profits and market efficiency.

Suggested Citation

  • Chappell, Henry & Guimaraes, Paulo & Ozturk, Orgul, 2006. "Confessions of an Internet Monopolist: Demand Estimation for a Versioned Information Good," MPRA Paper 10106, University Library of Munich, Germany, revised 2008.
  • Handle: RePEc:pra:mprapa:10106

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    References listed on IDEAS

    1. Philippe Aghion & Patrick Bolton & Christopher Harris & Bruno Jullien, 1991. "Optimal Learning by Experimentation," Review of Economic Studies, Oxford University Press, vol. 58(4), pages 621-654.
    2. Loginova, Oksana & Taylor, Curtis, 2003. "Price Experimentation with Strategic Buyers," Working Papers 03-02, Duke University, Department of Economics.
    3. Oksana Loginova & Curtis Taylor, 2008. "Price experimentation with strategic buyers," Review of Economic Design, Springer;Society for Economic Design, vol. 12(3), pages 165-187, September.
    4. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    5. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
    6. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier.
    7. Esteves, Rosa-Branca, 2010. "Pricing with customer recognition," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 669-681, November.
    8. Lee, Lung-Fei, 1995. "Asymptotic Bias in Simulated Maximum Likelihood Estimation of Discrete Choice Models," Econometric Theory, Cambridge University Press, vol. 11(03), pages 437-483, June.
    9. Alessandro Acquisti & Hal R. Varian, 2005. "Conditioning Prices on Purchase History," Marketing Science, INFORMS, vol. 24(3), pages 367-381, May.
    10. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September.
    11. Brian Kahin & Hal R. Varian (ed.), 2000. "Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Property," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611597, January.
    12. Carlos Arias & THOMAS L. COX, 1999. "Maximum Simulated Likelihood: A Brief Introduction for Practitioners," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 421, Wisconsin-Madison Agricultural and Applied Economics Department.
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    Cited by:

    1. John S. Jatta & Krishna Kumar Krishnan, 2016. "An empirical assessment of a univariate time series for demand planning in a demand-driven supply chain," International Journal of Business Forecasting and Marketing Intelligence, Inderscience Enterprises Ltd, vol. 2(3), pages 269-290.

    More about this item


    Versioning; price discrimination; field experiment; maximum simulated likelihood;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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