Versioning for information goods with development costs

Yonghong Sun ()
Additional contact information
Yonghong Sun: Xi’an Jiaotong University

Information Technology and Management, 2025, vol. 26, issue 2, No 6, 235-246

Abstract: Abstract This study examines information-good versioning strategies for a monopoly firm and is novel in that it endogenizes quality choices with general consumer utility and firm cost. Specifically, consumer utility for good quality is monotonic and concave. The firm first develops the highest quality version at a certain cost and then disables some features to make low-quality versions at no cost. The results reveal that in the case of two user types, if the number of low-type users is small or the additional value they obtain from being served compared with not being served is small, the optimal strategy for the firm is to give them up. If this situation is reversed, it is optimal to serve them. Meanwhile, if their taste for quality is very close to that of high-type users, they should be offered the same quality as the latter. Otherwise, the firm should implement a versioning strategy. Second, with n user types, whether a unique quality is offered to a user type depends on the corresponding benefit–cost analysis. Finally, versioning can never be socially optimal, as the social optimum requires low-type users to purchase the same quality as high-type users. Further, versioning prohibition lowers social welfare if the firm is compelled to stop serving low-type users.

Keywords: Pricing; Information goods; Versioning; Development costs (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10799-023-00410-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:infotm:v:26:y:2025:i:2:d:10.1007_s10799-023-00410-1

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10799

DOI: 10.1007/s10799-023-00410-1

Access Statistics for this article

Information Technology and Management is currently edited by Raymond Patterson and Erik Rolland

More articles in Information Technology and Management from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().