Pricing Strategies Of Information Goods And Service

The cost structure of information goods and service is high fixed cost and low marginal cost. This feature makes the pricing strategies of information goods and service worth be studied. The traditional cost-based pricing strategies can't be applied in the field of information goods and service, instead the value-based pricing strategies are always adopted by the monopolists to maximize their profits. Therefore, the customer utility function is the starting point of the monopolists practice. Only after the diversity of customer utility function is known, can the monopolists make the decision of pricing strategies and realize the profits of the relevant strategies, and the best strategy which can make the monopolist maximize the profit will be applied naturally.The paper mainly analyzes and summarizes the logical process of making the decision of pricing strategies of information goods and service. In some certain cases, given necessary assumptions we analyze the possible profits of available strategies. Firstly, the monopolist must establish his profit function and realize all possible profits, and find the approach to maximize his profit. Secondly, the monopolist will study the feature of customer utility function, then he will sort the customers into different groups and develop the product lines, such as the business users with high quality products or service, the home users with low quality products or service. Thirdly, when the monopolist provide products, he can sale them individually or in a bundle, and set the prices correspondingly. Depending on the diversity of utility function of bundling products, the monopolist whether provide the products individually or in a bundle (Bundling usually can average the whole valuation of products in bundle. Thus the monopolist can extract more consumer surplus from the demand curve by bundling the products or service.). Lastly, considering the real market structure of information goods and service, thepaper simply analyzes the competition influence in the monopolist decision. On one hand, the influence reflects on the development of new products, on the other hand, it reflects on the pricing of different monopolists who may sell products individually or in a bundle. In most cases, the bundling-products monopolist acquires more competition advantages than single-product firms.When we discuss the pricing strategies of information goods and service, we not only determine the nature of the decision process, but also use mathematical models to analyze the decision. This paper research is useful in the practice of pricing information goods and service. In addition, the analyzing and modeling methods used in the paper can be extended to other fields in practice.