Open Access. Powered by Scholars. Published by Universities.®
Management Information Systems Commons™
Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 1 of 1
Full-Text Articles in Management Information Systems
Pricing Software Upgrades: The Role Of Product Improvement & User Costs, Ram Bala, Scott Carr
Pricing Software Upgrades: The Role Of Product Improvement & User Costs, Ram Bala, Scott Carr
Information Systems and Analytics
The computer software industry is an extreme example of rapid new product introduction. However, many consumers are sophisticated enough to anticipate the availability of upgrades in the future. This creates the possibility that consumers might either postpone purchase or buy early on and never upgrade. In response, many software producers offer special upgrade pricing to old customers in order to mitigate the effects of strategic consumer behavior. We analyze the optimality of upgrade pricing by characterizing the relationship between magnitude of product improvement and the equilibrium pricing structure, particularly in the context of user upgrade costs. This upgrade cost (such …