MGCR 331 Lecture Notes - Lecture 6: Positive Feedback, Netflix, Complementary Good
25 Sep 2016
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Properties: can be easily replicated, can be easily distributed, have an unusual cost structure. High cost of producing the first copy. Low or zero costs of producing the second, third . No capacity-based limitations on production: costly to produce but cheap to reproduce, process. Competitors drive price to marginal costs of making additional copy. Personalized pricing: know your customer, personalize both product and pricing, use promotions to measure demand, the ideal economic scenario. Different price to each class of users. Offer full product line with different versions matching different needs. Maximize both value to customer and your share of this value: common dimensions of versioning. Group pricing: same product, different prices for different groups. Identify groups willing to pay less, offer them lower prices. Need to be able to identify group membership easily: examples. Movie tickets: group pricing and digital piracy. Piracy lowers a consumers willingness to pay.
