Digital Products Pricing in Network Expansion - Based on Network Economic Theory

Abstract

One of the characteristics of the network economy is the emergence of digital products. Digital products, the core of the network products, the pricing issue has drawn increasing attention. Precisely because of the network externalities demand-side economies of scale, positive feedback and increasing marginal returns and other features of the network economy, as well as the characteristics of high initial investment costs and low marginal costs of the digital products, digital products cannot be simply priced by traditional economic pricing method. Monopolist does not like the traditional monopolist which limits production and raises prices to earn high profits. Of course, the manufacturers will not simply rely on the demand and supply in accordance with the marginal revenue and marginal cost pricing. Therefore, based on the characteristics of the digital products itself, cost of production, network market environment and the characteristics of the analysis of the consumers’ behaviors, proceeding from the point of view of the network expansion, then the theory of groups pricing based pricing strategy is put forward.

Pricing of Public-Utilities-Products under Positive Externalities

“…Roumasset et al [13] developed a theory in the context of watershed conservation and groundwater extraction taking advantage of payment for ecosystem services (PES) pricing. Zhang et al [14] based on the characteristics of the digital products itself, cost of production, network market environment and the characteristics of the analysis of the consumers' behaviors, proceeding from the point of view of the network expansion, put forward the theory of groups pricing based pricing strategy. Chen et al [15] predict that at the introduction stage, the price should be stable in order to communicate quality-related information efficiently.…”