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Full-Text Articles in Management Information Systems
The Role Of Expectation–Reality Discrepancy In Service Contracts, Xuying Zhao, Hong Guo, Gangshu (George) Cai
The Role Of Expectation–Reality Discrepancy In Service Contracts, Xuying Zhao, Hong Guo, Gangshu (George) Cai
Information Systems and Analytics
Service contracts are common practice in some industries while being eliminated in others. To investigate this phenomenon, we identify expectation–reality discrepancy (ERD) as a key determinant. A provider's ERD is defined as consumers’ ex-ante expected valuation minus their ex-post realized valuation of the provider's service. Our analysis reveals that providers’ contract strategies critically depend on their ERDs rather than the true service valuations. A provider with a higher ERD is more likely to enforce contracts, regardless of whether the true service valuation is higher than that of the competitor. Providers should enforce contracts only when they have positive ERDs. Furthermore, …
Pricing Online Subscription Services Under Competition, Ram Bala
Pricing Online Subscription Services Under Competition, Ram Bala
Information Systems and Analytics
In recent times, rapid advances in the field of information technology have enabled firms selling information products (for example, in the form of a CD) to provide subscription services using remote servers. Making the product versus service decision involves a trade-off. Online subscription offerings are perceived to be of lower quality because of data security and network reliability issues but can reduce or even eliminate the credible commitment (of prices) problem typically faced by firms selling durable products. We model an infinite horizon game between two symmetric firms that choose the design architecture, that is, product or service (and consequent …
Usage-Based Pricing Of Software Services Under Competition, Ram Bala, Scott Carr
Usage-Based Pricing Of Software Services Under Competition, Ram Bala, Scott Carr
Information Systems and Analytics
With the emergence of high speed networks, software firms have the ability to deploy ‘software as a service' and measure resource usage at the level of individual customers. This enables the implementation of usage-based pricing. We study both fixed and usage-based pricing schemes in a competitive setting where the firm incurs a transaction cost of monitoring usage if it implements usage-based pricing. Offering different pricing schemes helps to differentiate the firms and relax price competition, particularly at higher monitoring costs, even when competing firms offer the same service quality. However, the low usage customers acquired by offering usage-based pricing are …
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 …