Estimating demand function parameters of mobile applications

Michael Scholz

Economics of Innovation and New Technology, 2017, vol. 26, issue 7, 621-633

Abstract: The vibrant market for mobile applications has raised awareness of several professional and also voluntary software developers. The key question especially for professional developers is how to improve the profit gained with a developed app. Recent research provided evidence on the factors that determine the demand of a mobile app. This paper presents a procedure to estimate demand function parameters that are required for developing pricing, advertising and also product update strategies. More specifically, the procedure estimates an app’s maximal willingness to pay, demand elasticity on price and network value. The procedure is based on the Fulfilled Expectations Cournot Model and requires knowledge about the apps being considered as substitutes to each other. It is applied to a data set consisting of download rank data of Apple iPhone apps.

Date: 2017
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DOI: 10.1080/10438599.2017.1263444

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