Dynamic pricing for subscription services

Gila E. Fruchter, Simon P. Sigué

Research output: Contribution to journalJournal Articlepeer-review

14 Citations (Scopus)

Abstract

This paper investigates the use of pricing schemes in subscription services that consist of various combinations of activation, subscription, and cancellation fees. When customers exclusively consider what is directly perceivable, the activation fee starts low and increases as the network grows (penetration strategy), whereas the cancellation fee starts high and decreases as the network grows (skimming strategy). The activation and cancellation fees take various other forms otherwise. The subscription fee remains low at the early stages and increases only when a reasonable number of subscribers is secured. Finally, the authors discuss the theoretical and managerial implications of their findings.

Original languageEnglish
Pages (from-to)2180-2194
Number of pages15
JournalJournal of Economic Dynamics and Control
Volume37
Issue number11
DOIs
Publication statusPublished - Nov. 2013

Keywords

  • Activation fee
  • Cancellation fee
  • Optimal control
  • Subscription fee
  • Subscription service

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