An Agent-Based Model To Study The Market Dynamics Of Perpetual And Subscription Licensing

The software industry is one of the most critical pillars of China’s information industry. It has been playing an increasingly important role in adjusting the industrial structure, changing the mode of development, enhancing the comprehensive national strength and safeguarding State Security. The price of product is the link between producers and consumers. Compared with the traditional products, software products have different features in economy and technology. Therefore, research on software product price has not only important academic value, but also some practical significance for promoting the development of the software industry in China.At present, the subscription license pricing strategy is adopted by more and more high-tech enterprises. Customers pay a portion of the initial fee, then the fixed fee at regular intervals. The pricing strategy has more advantages than the traditional fixed-fee perpetual licensing for its low price can quickly attract potential consumers, while the traditional fixed-fee perpetual licensing requires buyers to pay the full price. However, it’s still unraveled that under what conditions a firm implementing the subscription licensing strategy will win the market over its competitor practicing the fixed-fee perpetual licensing strategy. This paper summarizes the relevant research both at home and abroad, analyzes the micro mechanism of pricing software products with network effects, introduces the rules and the interactive mode of the software enterprise and consumer behavior, and applies the multi agent simulation method to establish the multi-agent model for software product competitive pricing. Using the agent based model, we simulate two types of firms which develop and sell two similar products or services to a fixed number of heterogeneous customers with the aforementioned two different pricing strategies. Individual customer chooses product or service based on his or her own preference as well as the product’s price and performance. Firms spend a percentage of the accumulated revenue on research and development to improve the product or service’s performance.This paper will use the agent simulation model, analyzes the effect of two kinds of pricing strategy for the market development of software enterprises. Simulation results suggest that there is a narrow window for the subscription licensing to beat the traditional perpetual licensing, especially when a large customer base is established with the perpetual licensing. In addition, the software enterprises should quickly make pricing adjustment according to the changes in the external environment, so that it can survive and development of enterprises in the face of adversity. We hope that our research may provide some reference and inspiration for software enterprises.