Research On Optimal Product Differentiation Design And Pricing Strategy For Information Products

Recently, with the development of information technology, information productsplay an increasingly important role in the economic development. Traditional productdifferentiation and pricing strategies are no longer applicable to information productsbecause of their unique economic features. Therefore, the present thesis investigatesthe product differentiation and pricing strategies for information products consideringtheir unique economic features and the behavior characteristics of customers andfirms. Theories and methods of economics, management science, systems science,and evolutionary computation are synthetically utilized. The main contents andcontributions of this thesis include:(1) Conception and economic features of information products are introduced.Then, the current researches on information products versioning, bundling, and freetrial strategies are reviewed.(2) Versioning strategy for information products is investigated. We first analyzeversioning strategy based on the single-dimensional quality model considering thecommon valuation and behavior characteristics of heterogeneous customers. Then,effects of customers’ preference distribution and their intolerance to qualitydegradation on versioning strategy are investigated based on two-dimensional qualitymodel. Our research makes a detailed examination on customer heterogeneity and itsimpacts, and provides novel managerial guidelines to information products providers.(3) Optimal bundling strategy for information products is numericallyinvestigated. First, we define the measure of customer heterogeneity. Numericalcomputation indicates that the maximal profit of three bundling strategies (individualsale, pure bundling, and mixed bundling) drops monotonically with the increasing ofheterogeneity among customers. Second, we present the mixed partial bundlingscheme for real-world situations in which a large number of information products areoffered and the preferences or valuations of customers considerably vary, and developa heuristic algorithm to construct the optimal mixed partial bundling schemes.Numerical results verify that the mixed partial bundling strategy is more profitablethan the three traditional bundling strategies.(4) Product differentiation and pricing strategies of two competitive information products providers in two-dimensional quality space are investigated. We relax thestrict assumption in previous researches that all the customers will buy products.Optimal strategies of both firms are solved analytically in different scenarios. In theglobal Nash equilibrium, two firms will make no differentiation along one qualitydimension and large differentiation along the other one.(5) Nonlinear dynamic system is adopted to analyze the release and pricing oflower-quality version in the information products market with network externalities.We use nonlinear dynamic system to model the evolution of the information productmarket and the low-quality version strategy, considering the features of thecompetitive market with network externalities in practice. Dynamic features of thissystem are analyzed and it is verified that the distribution of the low-quality versionmay result in chaos. Based on this dynamic framework, this thesis analyzes theimpacts of network externalities on the freeware strategy and compatibility decision inboth monopoly and duopoly.