Start Date
12-13-2015
Description
This study examines the competition between an independent software vendor (ISV) who offers a standard fixed-price software product and a cloud software vendor (CSV) who adopts a usage-based linear pricing scheme for its cloud-based software. Using a game theoretic approach, we set up a duopoly model to derive the optimal pricing and product feature choice decisions for both the ISV and the CSV in a market characterized with heterogeneous consumer preferences for software features, and different risk structures. Next, we plan to extend the duopoly model into a two-stage game and examine how the equilibrium outcomes change when we allow both vendors to exercise their software upgrade strategies. The results of our study will provide important implications to vendors and consumers in software markets where the Software-as-a-Service (SaaS) business model began to prevail and contribute to the growing literature on economics of cloud computing.
Recommended Citation
Liu, Charles; Au, Yoris; and Ayaburi, Emmanuel, "Pricing and Upgrade Strategies for Software Vendors in the Software-as-a-Service Market" (2015). ICIS 2015 Proceedings. 15.
https://aisel.aisnet.org/icis2015/proceedings/EconofIS/15
Pricing and Upgrade Strategies for Software Vendors in the Software-as-a-Service Market
This study examines the competition between an independent software vendor (ISV) who offers a standard fixed-price software product and a cloud software vendor (CSV) who adopts a usage-based linear pricing scheme for its cloud-based software. Using a game theoretic approach, we set up a duopoly model to derive the optimal pricing and product feature choice decisions for both the ISV and the CSV in a market characterized with heterogeneous consumer preferences for software features, and different risk structures. Next, we plan to extend the duopoly model into a two-stage game and examine how the equilibrium outcomes change when we allow both vendors to exercise their software upgrade strategies. The results of our study will provide important implications to vendors and consumers in software markets where the Software-as-a-Service (SaaS) business model began to prevail and contribute to the growing literature on economics of cloud computing.