tailieunhanh - Versioning Information Goods

The term ―luxury‖ is routinely used in our everyday life to refer to products, services or a certain lifestyle, however, often without a clear understanding of the luxury concept as it takes on many different forms for different people and is dependent on the mood and experience of the consumer: ―Luxury is particularly slippery to define. A strong element of human involvement, very limited supply and the recognition of value by others are key components‖ (Cornell 2002, p. 47). The word luxury ―defines beauty; it is art applied to functional items. Like light, luxury is enlightening. [. . .] Luxury. | Versioning Information Goods Hal R. Varian University of California Berkeley January 1997 1 Introduction One prominent feature of information goods is that they have large fixed costs of production and small variable costs of reproduction. Cost-based pricing makes little sense in this context value-based pricing is much more appropriate. Different consumers may have radically different values for a particular information good so techniques for differential pricing become very important. There are many forms of differential pricing a recent survey can be found in Varian 1989 . In this paper we will focus on a particular aspect of differential pricing known as quality discrimination or versioning. These terms describe situations in which the producer provides different qualities versions of a good which sell at different prices. As we will see below the point of versioning is to get the consumers to sort themselves into different groups according to their willingness to pay. Consumers with high willingness to pay choose one version while consumers with lower willingnesses to pay choose a different version. The producer chooses the versions so as to induce the consumers to self select into appropriate categories. Research support from NSF grant SBR-9320481 is gratefully acknowledged. Prepared for Digital Information and Intellectual Property Harvard University January 23-25 1997. 1 Figure 1 Pricing with observable characteristics 2 Observable characteristics The fundamental problem in any form of differential pricing is to set prices so that purchasers who are able and willing to pay high prices do so. If willingness to pay is correlated with observable characteristics such as membership in certain social or demographic groups prices can be keyed to these observable characteristics. Senior citizen discounts student discounts AAA discounts and so on are examples of this sort of differential pricing. The basic theory of this third-degreeprice discrimination is well .