Optimal freeware quality in the presence of network externalities: an evolutionary game theoretical approach

Ernan Haruvy and Ashutosh Prasad ()
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Ashutosh Prasad: School of Management, The University of Texas at Dallas, Richardson, TX 75083-0688, USA

Journal of Evolutionary Economics, 2001, vol. 11, issue 2, 248 pages

Abstract: New software products often face difficulty in achieving market penetration. A potential remedy is to offer a freeware version of the software to encourage initial adoption and establish a larger user base for the software, thereby increasing the commercial version's value to adopters in future periods. However, to avoid complete cannibalization of the commercial version, the freeware version's quality must be sufficiently low and the price of the commercial version must not be too high. We model the effect of these two decision variables, price and freeware quality, on the adoption of software using static and evolutionary game theory.

Keywords: Network; externalities; -; Freeware; -; Evolutionary; dynamics (search for similar items in EconPapers)
Date: 2001-04-19
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