Pricing strategy of first-enjoy-after-pay service offered by two-sided media platforms

Abstract

PurposeThis study highlights the impact of mental accounts on a user's decision-making regarding payment schemes and aims to determine the pricing strategy for the first-enjoy-after-pay service offered by the two-sided media platforms.Design/methodology/approachThis study establishes a game-theoretic model and utilizes backward induction to derive the equilibrium price by maximizing the monopolist's profit.FindingsThe findings indicate that the conditions for a two-sided media platform to offer the first-enjoy-after-pay service depend on the trade-off between pleasure attenuation and pain buffering and the effect of time discounts. Moreover, the authors found that the time discount is a critical factor in determining pricing strategies under various payment schemes offered by the platform.Research limitations/implicationsThis work adopts a uniform pricing strategy for users who opt for either immediate or post-payment schemes. Nevertheless, it is important to note that this approach has limitations in terms of offering discriminatory pricing for those who choose both payment schemes.Practical implicationsThis analytical work provides valuable insights for two-sided media platforms to optimize their payment scheme strategies and pricing considering the influence of a user's mental account.Originality/valueIn a two-sided media platform, the authors provide applicable conditions for the platform to offer first-enjoy-after-pay service considering the effect of mental accounts. Further, the authors show the optimal pricing strategy under different payment schemes provided by the platform.