Abstract

Experience products (e.g., Apps) require purchase or sampling in order to evaluate product quality. Online content reviews and free trial version of the product both can provide information for consumers to reduce quality uncertainty when evaluate product quality. This paper studies the firm’s pricing strategy of apps when free trials meet online reviews by considering the impact of informativeness of online reviews and the perceived quality homogeneity of the product. We define the value of the perceived quality homogeneity of free trial dividing informativeness as H/I ratio. Our results show that when the H/I ratio is low no consumer would try the free version and the optimal price with online reviews is higher than that without online reviews. However, when H/I ratio is relatively high some consumers would try the free version but the optimal price with online reviews equals to that without online reviews. Moreover, the optimal price, optimal demand of commercial version, the optimal demand of free trial version and the optimal profit are all increasing in the informativeness of online reviews. Some implications and future research directions are also discussed.

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