Dynamic pricing for subscription services

Gila E. Fruchter and Simon P. Sigué

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 11, 2180-2194

Abstract: This paper investigates the use of pricing schemes in subscription services that consist of various combinations of activation, subscription, and cancellation fees. When customers exclusively consider what is directly perceivable, the activation fee starts low and increases as the network grows (penetration strategy), whereas the cancellation fee starts high and decreases as the network grows (skimming strategy). The activation and cancellation fees take various other forms otherwise. The subscription fee remains low at the early stages and increases only when a reasonable number of subscribers is secured. Finally, the authors discuss the theoretical and managerial implications of their findings.

Keywords: Subscription service; Activation fee; Cancellation fee; Subscription fee; Optimal control (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:11:p:2180-2194

DOI: 10.1016/j.jedc.2013.05.003

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