Research On Inter-temporal Differentiation Design And Optimal Pricing Of Software Products And SaaS

In recent years,with the integration of information technology and economic society,the information industry,especially software and information technology services,has gradually become a pillar industry of the national economy.Based on theories and methods in management science,industrial economics,game theory and marketing,we consider unique economic features of software products,behavioral characteristics of firms and consumers to investigate the typical inter-temporal differentiation design and pricing strategies in the field of software products and Software-as-a-service(Saa S).The main contents are as follows.Firstly,considering the word-of-mouth(WOM)effect and consumer requirement uncertainty of software products,aiming at how the WOM effect affects the sequential release strategy of a software monopolist,we construct a model including a software monopolist’s three sequential release strategies(skipping,replacement and lineextension),and investigate the optimality of each release strategy.We find that Skipping strategy is optimal when the net WOM is negative and sufficiently small,while the Replacement strategy becomes the optimal choice when the net WOM is negative but not sufficiently small.However,the Line-extension strategy dominates the other two strategies when the net WOM is positive.Secondly,considering software products’ WOM effect and consumer requirement uncertainty,aiming at how the WOM effect affects the competing software firms’ sequential release strategy,we construct a duopoly model including the competing software firms’ two release strategies(early release or delay release),and investigate firms’ choices about release strategy in equilibrium.We find that in most scenarios,the firm expecting to have advantaged WOM adopts Early-release strategy while the firm expecting to have disadvantaged WOM adopts Delayed-release strategy.But when one firm’s expected WOM is sufficiently disadvantaged,it will also adopt Early-release strategy as long as the competitor’s expected WOM is sufficiently advantaged.Thirdly,considering competing Saa S firms’ relative competitive advantage,network effect and switching cost,aiming at how the competing Saa S firms make decisions about compatibility and pricing under behavior-based price discrimination(BBPD),we construct a two-period game-theoretical model of two Saa S firms,and study the competing Saa S firms’ compatibility choices in the BBPD context.we find that when switching cost effect dominates network effect,if a firm’s relative competitive advantage is sufficiently large,it will make its software compatible with the rival’s but the rival will not;but if a firm’s relative competitive advantage is moderate,both firms will choose incompatibility.Fourthly,considering the competing Saa S firms’ quality improvement gap,aiming at how the competing Saa S firms make the optimal pricing strategy,we construct a twoperiod game-theoretical model including two Saa S firms’ BBPD and uniform pricing,and study the competing Saa S firms’ optimal pricing strategy choices considering the quality improvement.we find that when the quality improvement gap is small or moderate,both firms adopt BBPD or both adopt uniform pricing in equilibrium;but when the quality improvement gap is large,both firms will adopt uniform pricing in equilibrium.This article enriches and expands the relevant theoretical system of information system economics,and provides a theoretical basis for software product and Saa S firms about how to choose the inter-temporal differentiation design and the optimal pricing.