Multi-Device Consumption of Digital Goods: Optimal Product Line Design with Bundling

2023 | Journal of Management Information Systems | Citations: 0

Authors: Bhargava, Hemant K.

Abstract: A contemporary business challenge for bundling theory is the distribution of dig ... Expand

Abstract: A contemporary business challenge for bundling theory is the distribution of digital content such as media, entertainment, software, and other information goods. Consumers can use a number of devices to interact with software, online services, music, video, news, and other forms of digital content. For instance, Netflix videos and Kindle ebooks, initially accessed only on television sets and computers, respectively, are now also consumed on smartphones and tablets. Print products are now distributed and consumed both in print and digitally. Firms offer product line designs that include prices for single device access as also bundle discounts for multi-device access, so that consumers can choose a device or even multiple devices. This paper provides guidelines regarding such multi-device product line design and pricing. A starting point is to note that there are many ways to practice bundling, from offering prices for single-device consumption as well as a bundle discount (mixed bundling), to forcing multi-device prices (pure bundling), and designs in between (partial bundling). Picking the best design, and associated prices, is a complex problem due to how single-device demand functions relate to multi-device demand. Recognizing that some dual-device purchases can occur even when there is no bundle discount, the paper develops intuition around the net gain or loss incurred from giving a bundle discount to entice single-device access buyers to dual sales. One surprising finding is that inducing dual sales through bundle discounts can be profitable even when intent to consume multiple times is quite weak, because in this case dual sales would not occur organically. Less surprisingly, such inducement is also profitable when multi-consumption intent is strong, and least attractive when the intent is moderate. When one of the devices is an emerging one or has weak own demand in the short term, then it can be useful to offer a partial bundle, tying sales for the stronger device into a bundle comprising access to both devices. When device valuations are such that consumers generally agree on the rank-ordering of the devices (e.g., if a location-based app offers greater value on a smartphone than on a tablet), then it is best to employ some type of bundling, unless the intent for multi-device consumption is proportionally lower among low-value consumers than for high-value consumers. Collapse

Topics: video game information good price management business model vertical differentiation

Methods: mathematical model theoretical contribution

Blockchain-based digital rights management systems: Design principles for the music industry

2023 | Electronic Markets | Citations: 0

Authors: Ciriello, Raffaele Fabio; Torbensen, Alexandra Cecilie Gjøl; Hansen, Magnus Rotvit Perlt; Müller-Bloch, Christoph

Abstract: Initially designed to protect intellectual property (IP) of digitalized informat ... Expand

Abstract: Initially designed to protect intellectual property (IP) of digitalized information goods such as music, games, or books, existing centralized digital rights management (DRM) systems mostly serve the interests of major publishers, with scant inclusion of rights owners, creators, and consumers. Although various blockchain-based DRM systems have been proposed, most of them mirror existing counterproductive IP restrictions. Analyzing the music industry as a case in point, this paper proposes design principles for blockchain-based DRM systems that provide an integrated and flexible solution by enabling transparent music licensing structures, consistent and complete rights metadata, and efficient and transparent royalty payout. The solution can be achieved by storing rights metadata on a public distributed ledger, by validating metadata through a consensus mechanism on a permissioned blockchain, and by algorithmically enforcing royalty payout via stablecoin through a smart contract. The design principles were evaluated by industry experts, validating their benefit for the music industry by increasing surplus value that is currently destroyed through previous suboptimal designs. Collapse

Topics: blockchain stablecoin smart contract distributed ledger technology cryptocurrency

Methods: design principle design requirement qualitative interview design artifact design science

Theories: transaction cost economics socio technical theory

How Free Market Entry Affects Creation and Engagement: Evidence from Non-Fungible Tokens

2023 | International Conference on Information Systems | Citations: 0

Authors: Kanellopoulos, Ioannis Filippos; Gutt, Dominik; Tunç, Murat; Li, Ting

Abstract: Content creation costs pose a threat for online marketplaces aiming to attract ... Expand

Abstract: Content creation costs pose a threat for online marketplaces aiming to attract new users. In response, platform managers devise new policies to subsidize these costs for content creators. In this study, we analyze data from a leading NFT marketplace to examine the impact of a lazy minting policy, which enables content creation without upfront fees, on created content, and engagement with that content. On the creation side, we observe a volume-effort trade-off, with creators producing more work for the market but exerting less effort during creation. On the engagement side, we note a decrease in engagement, particularly affecting creators with higher engagement levels prior to the policy change. We explore the mechanism driving this reduction and find that effort and attention play crucial roles, while a larger follower count does not shield creators from decreased engagement. Finally, we discuss our contributions to the literature and its implications for platform managers. Collapse

Topics: information good application programming interface non-fungible token website blockchain

Methods: experimental group longitudinal research regression discontinuity design logarithmic transformation difference in differences

The Rise of Recommerce: Ownership and Sustainability with Overlapping Generations

2023 | International Conference on Information Systems | Citations: 0

Authors: Li, Rubing; Sundararajan, Arun

Abstract: ... Expand

Abstract: Collapse

Topics: price management willingness to pay information good systems development IS economics

Methods: economic model

Theories: contract theory

On the Economic Nature of Medical Information: Implications for the Development of Information Infrastructures in the Healthcare Sector

2023 | HICSS | Citations: 0

Authors: Reimers, K.; Luo, Y.

Abstract: IT adoption in the healthcare sector still lags behind expectations. The litera ... Expand

Abstract: IT adoption in the healthcare sector still lags behind expectations. The literature has extensively studied IT adoption in the healthcare sector as a problem of information infrastructure development. We extend that literature by adding a supply chain perspective which treats information infrastructures as assemblies of information components. This allows us to apply the theory of collective action to these individual components rather than to the information infrastructure as a whole, as is characteristic of the information infrastructure literature. We find that some information components have the character of common resource pool goods, which require specialized and local institutional arrangements to overcome the implied free-rider problem. This sheds a new light on the current problems of slow IT adoption in the healthcare sector. Collapse

Topics: information technology infrastructure healthcare data supply chain management electronic health record information good

Methods: cross sectional research

Theories: theory of information theory of collective action

Determining the optimal release time of movies: A study of movie and market characteristics

2023 | Decision Support Systems | Citations: 0

Authors: Sharma, Megha; Basu, Sumanta; Chakraborty, Soumyakanti; Bose, Indranil

Abstract: The over-the-top (OTT) industry has witnessed remarkable growth in recent years ... Expand

Abstract: The over-the-top (OTT) industry has witnessed remarkable growth in recent years with a sharp increase in the number of subscribers, leading to increased competition among OTT platforms to acquire movie rights. Conse­ quently, the gap between the theatrical and OTT releases has been diminishing over the last few years. An early release of a movie on an OTT platform fetches a higher distribution fee for a movie distributor (MD), however, it reduces the MD’s revenue from the theatrical release. Therefore, it becomes critical for the MD to determine the optimal release time and distribution fee combination. In this paper, we analytically solve the MD’s decision problem and provide a detailed analysis of how the optimal release time varies with changes in platform characteristics such as the proportion of ad revenue and the platform’s risk profile, movie characteristics such as success factor and suitability for OTT, and market characteristics such as broadband penetration, piracy rate and customers’ preferences for viewing channels. We compare our results with the actual release times of 243 movies released during 2015–2022. We find that the optimal release time increases with ad revenue proportion, broadband penetration, and piracy rate, whereas the optimal fee reduces non-linearly with release time and depends on OTT’s risk profile. Our findings also indicate that the optimal release time reduces for movies that do not provide any additional utility for theater goers, and as customers’ preference towards OTT increases. Our work provides much-needed guidelines for professionals dealing with movie releases on OTTs. Collapse

Topics: digital service Netflix Disney+ decision support system Hulu

Methods: parametric test mathematical model ANOVA paired t-test artificial neural network

Which Enemy to Dance with? A New Role of Software Piracy in Influencing Antipiracy Strategies

2023 | Information Systems Research | Citations: 0

Authors: Sun, Can; Ji, Yonghua; Geng, Xianjun

Abstract: Software piracy is a challenging issue faced by software firms and governments a ... Expand

Abstract: Software piracy is a challenging issue faced by software firms and governments all over the world. To control software piracy, firms exert considerable effort in antipiracy measures. This paper uses game theoretical models to study how software firms should determine their antipiracy efforts and product prices. There are two unique aspects of our model. First, antipiracy efforts have both a direct effect and a cross effect on software piracy. Second, we capture two types of competitions when piracy exists: one between a legitimate product and its pirated counterpart, and the other between two pirated products. We find several interesting results. We show that due to pirated products’ buffer effect not studied before, eliminating piracy does not necessarily mean higher profit for firms. This reveals an unexplored advantage of desktop software comparing with Software as a Service (SaaS) that can totally eliminate piracy. Direct and cross effects have different impacts on firms’ decisions and profits. Opposite to what one might expect, when a firm’s antipiracy effort becomes more effective in increasing the cost of pirating its own product but not its competitor’s product, the firm becomes worse off under certain conditions. By contrast, if the antipiracy effort’s cross effect is higher, therefore increasing the cost of pirating its competitor’s product, a firm will always be better off. The managerial implication is that if a firm ignores the cross effect, it could underinvest in antipiracy effort, causing its profit to suffer. History: Karthik Kannan, Senior Editor; Amit Mehra, Associate Editor. Funding: C. Sun’s research is supported by the National Natural Science Foundation of China [Grants 72201262, 71921001]. Collapse

Topics: network effect software as a service IS economics digital piracy consumer surplus

Methods: mathematical model survey computational algorithm

Theories: game theory

An Economic Analysis of Subscription Sharing of Digital Services

2023 | International Conference on Information Systems | Citations: 0

Authors: Wu, Xiaokun; Wu, Shin-yi; Zhang, Zhongju

Abstract: Subscription sharing, where one shares her premium digital services subscriptio ... Expand

Abstract: Subscription sharing, where one shares her premium digital services subscription with other users, has become common due to subscription-sharing platforms like Togetherprice, Gowd, and Sharesub. This raises a question: Does it still make economic sense to offer a menu of subscription plans (e.g., an individual plan as well as a discounted family plan)? In this study, we look at a monopolist service provider that offers both plans but faces the potential threat of subscription sharing. We analyze the optimal prices and the impact of sharing on profit, customer surplus, and overall society benefits. Our results indicate that even with subscription sharing, offering both plans is at least as profitable as only offering individual plans. Under certain conditions, subscription sharing can even boost profits. Furthermore, our numerical analysis suggests that subscription sharing can benefit society. These findings suggest that subscription sharing is not necessarily as troublesome as one would have expected. Collapse

Topics: IS economics consumer surplus economic surplus price management price discrimination

Methods: economic model mathematical model

How Online Reviews Interact with a Firm's Free Version Strategy

2022 | Information & Management | Citations: 0

Authors: Cao, Huanhuan; Jiang, Jinhu; Geng, Xianjun

Abstract: This study developed a game-theory model to explore interactions between online ... Expand

Abstract: This study developed a game-theory model to explore interactions between online reviews and free version strategies. Results show that a firm could have four strategies as a strategic tool to respond best to availability of online reviews depending on the relative strength of network effect, cannibalization effect, and dispersed effect. Moreover, when offering a free version is the best strategy both with and without online reviews, online reviews and the free version strategy could still be both complementary and substitutive. This result provides possible theoretical explanations for mixed empirical conclusions regarding whether online reviews complement or substitute free version strategies. Collapse

Topics: online review network effect mobile application market digital distribution price management

Methods: optimization model computational algorithm theoretical contribution game theoretical model

Theories: game theory

Piracy and Bundling of Information Goods

2022 | Journal of Management Information Systems | Citations: 1

Authors: Jin, Chen; Wu, Chenguang; Lahiri, Atanu

Abstract: Bundling is considered to be an effective pricing strategy for zero-marginal-cos ... Expand

Abstract: Bundling is considered to be an effective pricing strategy for zero-marginal-cost information goods. Yet, in many information-goods markets, the effectiveness of bundling remains hard to ascertain. This is because information goods exhibit other characteristics as well, which can potentially interfere with a manufacturer's bundling decision. For instance, they are also prone to piracy, and it is not obvious what impact, if any, piracy can have on the efficacy of bundling. To address this issue rigorously, we reexamine the classic bundling problem with the backdrop of piracy and show that piracy can severely diminish the appeal of bundling to a monopolist seller. Evidently, bundling abets piracy and, in certain situations, so much so that the losses from piracy more than nullify the traditional benefits of bundling. This insight is in fact fairly generalizable. The implication for manufacturers of digital goods is that they need to take piracy into consideration in their bundling decision. In particular, they should consider refraining from bundling when the illegal products are close substitutes for the legal ones. Collapse

Topics: price management IS economics consumer surplus information good

Methods: descriptive statistic experiment mathematical model robustness check literature study