archive of the former site EconWPA.wustl.edu

Please do not link or reference this page. Use one of the following URLs:
econpapers.repec.org as http://econpapers.repec.org/paper/wpawuwpio/9602001.htm
ideas.repec.org as http://ideas.repec.org/p/wpa/wuwpio/9602001.html

Network Effects, Pricing Strategies, and Optimal Upgrade Time in Software Provision.

 
Paper:ewp-io/9602001
From:    
Date: Sat, 10 Feb 96 04:56:47 CST

Abstract:
There are many products which have little or no value in isolation, but if combined with other products or services, they generate more value. The utility that a given user derives from these products depends upon the number of other users who consume the same products. This kind of positive consumption externality is defined as a network externality. Network externalities are pervasive in the computer in the computer software market. While software vendors consider pricing strategies, they must also take into account the impact of network externalities on their sales. Our main interest in this paper is to describe the firm's strategies and behavior in the presence of network externalities. Based on the two-stage model in this paper, we find that the software firm will charge a lower price to attract more users in the first stage, then charge a higher price as it does in monopoly as traditional economic theory indicates. And our dynamic model shows that the optimal upgrade time occurs when gross profit of the first edition equals the gross profit of the second edition of the software. This implies that either too earlier or late promotion of the new software version will causes profit loss.

Postscript files:(viewing .ps)
      archive: 9602001.ps  or 9602001.ps.gz  is 58340 bytes, 8-23-97.
Acrobat pdf files:(viewing .pdf)
      archive: 9602001.pdf  is 54853 bytes, 1-12-96, or 9602001.pdf.gz 
HTML File: (about HTML files)
      archive: 9602001.html  is 21035 bytes (not including gifs) 1-12-96.
DOC File:
      archive: 9602001.doc 
Access statistics for this paper at LogEc which is a part of the RePEc project as was/is EconWPA.
Translate to another language with babel.altavista.com EconWPA reference ewp-io/9602001
RePEc reference RePEc:wpa:wuwpio:9602001 send e-mail to

EconWPA began as a conversation between Bob Parks and Larry Blume on January 28, 1993. I located Paul Ginsparg's archive (then xxx.lanl.gov) and he graciously installed his software on a Sun Sparc system which was supporting the department of economics email and computation. EconWPA began accepting papers July 1, 1993 and had ftp, email, gopher and web interfaces. The web interface for submissions was engineered into existence in July 1995. A complete and catastrophic machine failure in 1999 caused the loss of EconWPA's email new paper announcment service at which time there were over 15,000 subscriptions with over 8,000 unique email addresses.

In 2005, Arts and Sciences commandeered the computing services that I had provided to the Department of Economics since 1987. Some might say that the department was sold out, others would (erroneously) claim that centralization is efficient, and still others would claim that I have few marketing skills.

I was told that I could keep operating EconWPA (as well as many other services including rfe.wustl.edu, barnett.wustl.edu, and three RePEc servers) but I would receive no support (hardware, software, or anthing else) and (as had been the case) no compensation. At that point, given the apparent low valuation of my activities by the department, and university, it made no sense for me to continue operating EconWPA or other services.

Thanks to all who have supported EconWPA in the past.

A Chinese curse states May you live in intersting times. I have. Bob Parks - Jan 2006