CoChat
Sign Up
Cited by 152Digital Platforms and EconomicsConsumer Market Behavior and PricingCopyright and Intellectual Property

The DOI matches its Crossref record; 69 of the 71 references it cites were found in a registry or an index.

Economics of Free Under Perpetual Licensing: Implications for the Software Industry

Niculescu, Marius F., Wu, D. J.·2014·Information Systems Research
DOI 10.1287/isre.2013.0508
Open this paper in CoChat — free account

Abstract

In this paper, we explore the economics of free under perpetual licensing. In particular, we focus on two emerging software business models that involve a free component: feature-limited freemium (FLF) and uniform seeding (S). Under FLF, the firm offers the basic software version for free, while charging for premium features. Under S, the firm gives away for free the full product to a percentage of the addressable market uniformly across consumer types. We benchmark their performance against a conventional business model under which software is sold as a bundle (labeled as “charge for everything” or CE) without free offers. In the context of consumer bounded rationality and information asymmetry, we develop a unified two-period consumer valuation learning framework that accounts for both word-of-mouth (WOM) effects and experience-based learning, and use it to compare and contrast the three business models. Under both constant and dynamic pricing, for moderate strength of WOM signals, we derive the equilibria for each model and identify optimality regions. In particular, S is optimal when consumers significantly underestimate the value of functionality and cross-module synergies are weak. When either cross-module synergies are stronger or initial priors are higher, the firm decides between CE and FLF. Furthermore, we identify nontrivial switching dynamics from one optimality region to another depending on the initial consumer beliefs about the value of the embedded functionali…

Overview

Integrity signals

Registry

Crossref · 10.1287/isre.2013.0508

Cites

69 of 69 references verified0 citation errors · 0 not checkable

Statistics

Recomputing p-values needs the paper’s full text.

Verification

Claims the paper makes

This paper’s full text isn’t openly available, so its claims and self-check weren’t run. The registry and citation checks still apply.

Claims other papers make about this one

Each is checked against this paper’s own text: does it say what the citing paper says it does?

Citations

Cites

Show all 71 references

Research works printed but not linked: 12

  1. 10.1037/0022-3514.39.5.752 · DOI · Paper page
  2. Chellappa RK, 2013, Conf. Inform. Systems Technol.
  3. Claburn T, 2013, InformationWeek
  4. Dey D, Lahiri A (2013) The DLC strategy: Go vertical in a horizontal market. Working paper, Univ. of Washington (Version Nov. 5). SSRN: http://ssrn.com/abstract=2066194.
  5. Miller CC, 2009, New York Times
  6. Osborne MJ, 1998, Amer. Econom. Rev., 88, 834
  7. Radner R, 2013, Proc. Natl. Acad. Sci. USA
  8. Riggins FJ, 2003, J. Management Inform. Systems, 19, 69
  9. 10.2139/ssrn.1962189 · DOI
  10. Simon HA, 1972, Decision Organ., 1, 161
  11. Spiegler R, 2006, Theoret. Econom., 1, 207
  12. Whittaker Z, 2013, WWDC'13: Apple Keynote, by the Numbers

Cited by

Sorted by citations

See all 152

Related

Metadata

Authors
Niculescu, M. F., & Wu, D. J.
Affiliations
Georgia Institute of Technology (US)
ORCID
Venue
Information Systems Research
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Published
2014-03
Volume
25
Issue
1
Pages
173-199
ISSN
  • 1047-7047 (ISSN-L)
  • 1526-5536
DOI
10.1287/isre.2013.0508
OpenAlex
W3123695987
Cited by
151
References
71
Citations by year
2026: 11 · 2025: 11 · 2024: 9 · 2023: 9 · 2022: 11 · 2021: 13 · 2020: 17 · 2019: 19 · 2018: 12 · 2017: 14 · 2016: 13 · 2015: 5 · 2014: 3
FWCI
35.83
Type
journal article
Language
en
Open access
closed
Locations
Information Systems Research (publishedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Digital Platforms and Economics
  • Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
  • Social Sciences › Business, Management and Accounting › Marketing › Copyright and Intellectual Property
Keywords
freemium model, software business models, bounded rationality, information asymmetry, word-of-mouth effect, experiential learning, price skimming, penetration pricing, dynamic pricing, software pricing

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

Are you an author, or do you see a problem with this page? Request a review