Title: | Selling and Leasing Software with Network Externality |
Authors: | Zhang, Jennifer - University of Toledo Seidmann, Abraham - University of Rochester |
Keywords: | Software licensing, Coarse Conjecture, Price discrimination, Network externality, Commitment, Upgrade, Compatibility, Risk |
Issue Date: | 2006 |
Series/Report no.: | NET Institute Working Paper;06-13 |
Abstract: | Previous studies suggested that a monopoly durable goods seller can use leasing to effectively avoid the time-inconsistent problem raised by Coase Conjecture. This paper extends those previous works by examining the monopoly seller's selling and leasing strategy for a special type of durable good --- software. We look at a software vendor that can sell (at a posted price) or lease his product where as a lesser he guarantees that the lessees will always have the latest version of the software. We address some of the specific issues of implementing the selling and/or leasing policies at the packaged software market, including the impact of network externality, upgrade compatibility, and commitment on pricing in a dynamic environment. We show that by properly defining their pricing structure, software vendors can segment the market and second-degree price discriminate the consumers. We also demonstrate how software vendors can manage the trade-offs of selling and leasing to achieve a higher profit as well as the corresponding welfare effect on the consumers. |
URI: | http://hdl.handle.net/2451/28456 |
Appears in Collections: | NET Institute Working Papers Series |
Files in This Item:
File | Description | Size | Format | |
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Zhang_06-13.pdf | 322.27 kB | Adobe PDF | View/Open |
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