Monopoly Versioning of Information Goods When Consumers Have Group Tastes

Nault, Barrie R; Wei, Xueqi (David)

Monopoly Versioning of Information Goods When Consumers Have Group Tastes

dc.contributor.author	Nault, Barrie R
dc.contributor.author	Wei, Xueqi (David)
dc.date.accessioned	2015-05-14T18:05:54Z
dc.date.available	2015-05-14T18:05:54Z
dc.date.issued	2014-06
dc.description	Author Posting: Dr. Barrie Nault. 2014. This is the author's version of the work. It is posted here by permission of Wiley for personal use, not for redistribution. The definitive version was published in the journal Production and Operations Management, 23, 6, 1067-1081. DOI: 10.1111/poms.12180	en_US
dc.description.abstract	Large sunk costs of development, negligible costs of reproduction, and distribution resulting in economies of scale distinguish information goods from physical goods. Versioning is a way firms may take advantage of these properties. However, in a baseline model where consumers differ in their tastes for quality, an information goods monopolist only offers one version, and this differs from what we observe in practice. We explore formulations that add features to the baseline model that result in a monopolist offering multiple versions. We examine versioning where consumers differ in individual tastes for quality, and groups of consumers that share the same group taste are delineated by segments of individual tastes. We find that if groups have mutually exclusive characteristics—a horizontal dimension—that they value relative to the shared characteristics, then versioning is optimal. Consequently, any horizontal differentiation in product line design favors versioning. In addition, when group tastes are hierarchical such that higher taste groups value characteristics that lower taste groups value but not vice versa—a vertical dimension—as long as the valuations of the higher and adjacent lower taste group are sufficiently close, then versioning is also optimal. Our conditions, which also help determine how many versions are optimal, are based on exogenously defined parameters so that it is feasible to check them in practice.	en_US
dc.identifier.citation	Wei, X., and B.R. Nault, "Monopoly Versioning of Information Goods When Consumers Have Group Tastes," Production and Operations Management, 23, 6 (June 2014), 1067–1081.	en_US
dc.identifier.doi	http://dx.doi.org/10.11575/PRISM/28751
dc.identifier.uri	http://hdl.handle.net/1880/50430
dc.language.iso	en	en_US
dc.publisher	Wiley	en_US
dc.publisher.corporate	University of Calgary	en_US
dc.publisher.faculty	Haskayne School of Business	en_US
dc.subject	information goods	en_US
dc.subject	pricing strategies	en_US
dc.subject	market segmentation	en_US
dc.subject	product differentiation	en_US
dc.subject	versioning strategies	en_US
dc.title	Monopoly Versioning of Information Goods When Consumers Have Group Tastes	en_US
dc.type	journal article
thesis.degree.discipline	Management Information Systems	en_US

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