Dynamic pricing for subscription services

Gila E. Fruchter, Simon P. Sigué

    Research output: Contribution to journalJournal Articlepeer-review

    12 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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