Competition Research On Free Pricing Pattern Of Bit-Product With Network Effects

With the social evolution from industrial society to information society, bit-products play a more important role in the economy. In the bit-economy, the free pricing pattern has been widely used by enterprises as a mainstream pricing method. However, academic research on free pricing has just started. Therefore, we make a preliminary exploration on the free pricing pattern. In this paper, the free pricing pattern is defined as: the manufacturer provide a long-term product for free, and consumers don’t need to pay any value of loss they can feel (monetary or non-monetary), then, the manufacturer make profit from related products to cross-subsidise free products. The reason why free pricing pattern is especially fit for the bit-product pricing is due to some special properties of bit-products, as the network effects which are widely existed in bit-products. This paper argues that the essence of free pricing pattern is cross-subsidization, but unlike the cross-subsidization in the traditional economy, the free pricing pattern in the bit-economy is not a predatory pricing. Adopting free pricing pattern not only does not discourage competition, but can improve the efficiency of the market. In this paper, the free pricing pattern is divided into four categories, which are called: pattern of value-added products, pattern of free and charged versions, pattern of value recreation and pattern of platform. The classify is followed by modeling and analysis. After that, we raise the adopting conditions of the four patterns, and present competing strategy recommendations for enterprises.