Behaviour-based pricing for multi-version information goods

Jingyan Li, Xiang Ji and Sandun C. Perera

International Journal of Production Research, 2024, vol. 62, issue 14, 5185-5210

Abstract: Behaviour-based pricing (BBP) is commonly observed in the information goods industry. Information goods providers typically sell multi-version products and have implemented different BBP strategies for their products. However, previous research on BBP is mostly limited to single-version products, which may not effectively guide practical decision-making regarding multi-version products. This gap sparks interest in how BBP can be applied to multi-version information goods. We show that the equilibrium pricing strategy depends on the quality gap between the products and how much consumers and the firm value future benefits. The firm should implement BBP for both high- and low-quality products if it values future benefits more than consumers do. If consumers value future benefits more than the firm, the firm should not implement BBP for either product. Moreover, when the firm and consumers value future benefits equally, the firm should only practice BBP for the low-quality product. Our calculations of consumer surplus and social welfare reveal that the absence of BBP doesn't always lead to the maximum benefits for consumers and society. Interestingly, if the firm values future benefits more than its consumers do, applying BBP only to high-quality products or both products may lead to higher consumer surplus and social welfare.

Date: 2024
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DOI: 10.1080/00207543.2023.2289073

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