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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/14148
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| Title: | Market Segmentation for Information Goods with Network Externalities |
| Authors: | Jing, Bing |
| Keywords: | Information Goods
Network Externality
Market Segmentation |
| Issue Date: | 30-May-2003 |
| Publisher: | Stern School of Business, New York University |
| Series/Report no.: | CeDER-05-25 |
| Abstract: | Positive externalities characterize the consumption of a majority of
information goods such as software, various Internet services, and
online communities. In a simple model of vertical differentiation, we
show that network externality is a critical factor for the versioning of
such information goods. In particular, a multi-product monopolist offers
two versions of distinct qualities. The underlying rationale is that
offering the low-end version expands the network size and thus enhances
the (network) value of the high-end version, allowing the firm to charge
a higher price for the high-end version. In addition, we show that the
low-quality version may be offered for free under very general
conditions. Competition between firms producing compatible products
reduces their incentive to version their products due to the spillover
effects in a shared product network. |
| URI: | http://hdl.handle.net/2451/14148 |
| Appears in Collections: | CeDER Working Papers
IOMS: Information Systems Working Papers
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