THE DEFENSE OF PRICE DISCRIMINATION IN NETWORK AND INFORMATION GOODS MARKETS

It is not uncommon that articles focused on consumer-price interaction in the network and information goods market swiftly condemn price discrimination as an obfuscation, on-purpose price complexity, or market failure. The reason is a general neoclassical rule of an efficient market where prices are set at marginal cost with no price discrimination. However, the matter is more complicated. This review provides authors an overview of why, where, and which type of price discrimination should be viewed by different optics. Goods such as software, cell carrier services, electronic newspapers subscription, electric energy supply, payment accounts, books, copyrighted content streaming, etc, cannot be treated like manufactured goods. The reasons are specific conditions – substantial and/or repeated fixed/sunk cost, economies of scale, and demand heterogeneity. Recognized economist W. J. Baumol described marginal cost set prices under these conditions as an ‘economic suicide’. Reviewed articles showed that firms are forced to adopt price discrimination in order to recover their costs and to serve more consumer segments. Reviewed authors provided facts to support the use of multipart tariffs, dynamic pricing, versioning, bundling, and Ramsey pricing. These conclusions are used for suggestions on how several studies of information and network goods should be modified. Modifications are related mostly to model assumptions and pricing conclusions. I argue that, in the case of information and network goods, there is justified price discrimination. Hence, there is a certain justified level of price complexity that has to be accepted and not taken as automated evidence of inefficiency, market power, and consumer exploitation.

Network Economy: Foundations and Concepts

الاقتصاد الشبكي: الأسس والمفاهيم شكري محمد الصالح حجلاوي كلية العلوم والدراسات الإنسانية بشقراء، المملكة العربية السعودية الملخص: شهدت المجتمعات في العقود الأخيرة انتشاراً واسعاً للتكنولوجيا الرقمية وأصبح الجميع يعيش في عالم من الشبكات المعقدة. أدت هذه التحولات إلى تغير عميق في سلوكيات الوحدات الاقتصادية من جانبي العرض والطلب مما أدى إلى ولادة مناهج جديدة في الاقتصادي الجزئي وظهور الاقتصاد الشبكي. إن أحد أهم الأسس التي يرتكز عليها الاقتصاد الشبكي هي أن قيمة السلع الشبكية تعتمد بشكل أساسي على وجود التأثيرات الخارجية للشبكة التي تؤثر على قرار المستهلك وبالتالي على نموذج انتشار السلع الشبكية. في هذا المقال نتناول بالشرح الأسس والمفاهيم الأساسية كمدخل للاقتصاد الشبكي. الكلمات المفتاحية: الاقتصاد الشبكي، التأثيرات الخارجية للشبكة RESEARCH ARTICLE Network Economy:Foundations and Concepts Shokry Mohamed Salah Hajlaoui Shaqra University College of Science and Humanities, kingdom of Saudi Arabia Abstract In recent decades, societies have witnessed huge spread of digital technology and everyone became submerged in a world of complex networks. This shift led to a deep change in the behavior of economic units on both the supply and demand sides, giving birth to new approaches in microeconomics and the emergence of the network economy. One of the most important foundations of network economy is that the value of network goods is mainly dependent on the existence of Network Externalities which influence consumer decision and by which the diffusion model of network goods. In this article, we will explain the basic principles and concepts as an introduction to the network economy. Keywords: network economy, network externalities

Influence of strategic consumers on the network goods market

One of the important trends in modern economic development is the expanding variety ofso-called network commodities. Network commodity is such a good the usefulness of which for each consumer depends on the total number of using it consumers. The purpose of the paper is to study dynamic pricing in the network commodity market with a positive network effect in the presence of two types of consumers: myopic, taking into account only the current utility of the commodity, and strategic, focused on utility for the entire period of use of the commodity. Market dynamics, including price trajectories maximizing the monopolist supplier's revenues, are established by running numerical experiments on the corresponding theoretical model. The features of this dynamics are revealed for the cases of a large share of myopic consumers and under the conditions of dominance of strategic consumers. It is demonstrated that, in contrast to the situation in the market of ordinary commodities, a monopoly supplier of the network commodity may be interested in the presence of strategic consumers in the market. The more such consumers are present, the shorter the period of warming up the market by the supplier by means of low prices and the higher the rate of the consequent price growth. Strategic consumers find themselves hostage of their own focus on the integral effect in consumption. The directions of further research of the market of network commodities with the heterogeneous consumers are presented.

Information Disclosure and Pricing Policies for Sales of Network Goods

Amazon and Apple, which sell tablet devices, have adopted different implicit information policies and developed distinct “reputations” about their tablets’ sales volume release. With Amazon, “even a number as basic, and presumably impressive, as how many Kindle e-readers the company sells is never released.” With Apple, iPhone and iPad sales numbers are always released, even if they are disappointing. In the paper “Information Disclosure and Pricing Policies for Sales of Network Goods,” the authors study the sales information release policy, disclosure versus nondisclosure, for selling network goods subject to market size uncertainty. They identify two countervailing effects, a prodisclosure “Matthew effect” and an antidisclosure saturation effect, that drive the firms’ sales information disclosure policies. In addition, the authors also study the situation where the firm can decide on an all-or-nothing information disclosure policy together with endogenized prices, including state-independent pricing, contingent preannounced pricing, and contingent pricing without commitment.