Optimal freeware quality in the presence of network externalities: an evolutionary game theoretical approach |
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Authors: | Ernan Haruvy Ashutosh Prasad |
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Institution: | (1) Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel , IL;(2) School of Management, The University of Texas at Dallas, Richardson, TX 75083-0688, USA(e-mail: aprasad@utdallas.edu) , US |
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Abstract: | New software products often face difficulty in achieving market penetration. A potential remedy is to offer a freeware version
of the software to encourage initial adoption and establish a larger user base for the software, thereby increasing the commercial
version's value to adopters in future periods. However, to avoid complete cannibalization of the commercial version, the freeware
version's quality must be sufficiently low and the price of the commercial version must not be too high. We model the effect
of these two decision variables, price and freeware quality, on the adoption of software using static and evolutionary game
theory. |
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Keywords: | : Network externalities – Freeware – Evolutionary dynamics |
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