Versioning Strategy of Information Goods with Network Externality in the Presence of Piracy

21 Pages Posted: 21 Nov 2011 Last revised: 17 Sep 2014

See all articles by Shivendu Shivendu

Shivendu Shivendu

University of California, Irvine - The Paul Merage School of Business

Zhe Zhang

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: November 20, 2011

Abstract

In our model, market consists of two types of consumers who receive some common utility from the basic functionality of the information good but have heterogeneous valuation for other value enhancing functionalities. We show that in absence of piracy, versioning is optimal when the proportion of high valuation consumers is neither too large nor too small. In the presence of piracy, when the cost of piracy is too low for the lower valuation consumers, the information good provider offers only high quality product. Presence of network effect makes versioning strategy less likely to be optimal for the provider.

Keywords: versioning, information goods, piracy

Suggested Citation

Shivendu, Shivendu and Zhang, Zhe, Versioning Strategy of Information Goods with Network Externality in the Presence of Piracy (November 20, 2011). Available at SSRN: https://ssrn.com/abstract=1962189 or http://dx.doi.org/10.2139/ssrn.1962189

Shivendu Shivendu (Contact Author)

University of California, Irvine - The Paul Merage School of Business ( email )

SB 342
Irvine, CA 92617
United States

Zhe Zhang

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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