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Selling and Leasing Software with Network Externalities

Selling and Leasing Software with Network Externalities. Authors: Jennifer Zhang, and Abraham Seidmann Discussant: Mingdi Xin Doctoral Candidate Stern School of Business, NYU. Summary of the Paper. Without a network effect With Commitment

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Selling and Leasing Software with Network Externalities

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  1. Selling and Leasing Software with Network Externalities Authors: Jennifer Zhang, and Abraham Seidmann Discussant: Mingdi Xin Doctoral Candidate Stern School of Business, NYU

  2. Summary of the Paper Without a network effect • With Commitment • Pure selling, pure leasing and the hybrid pricing model are equivalent • Without commitment • Profitability: Leasing > Hybrid > Selling • Consumer surplus and social welfare: Selling > Hybrid > Leasing Mingdi Xin Stern School of Business

  3. Summary of the Paper With a network effect • With Commitment • Profitability: Selling = Hybrid> Leasing • Consumer surplus and social welfare: Selling = Hybrid > Leasing • Without commitment • When network externality is significant, the hybrid pricing model can be more profitable than both leasing and selling. Mingdi Xin Stern School of Business

  4. Strength • Durable goods pricing + Network effects • Interesting results! • The hybrid pricing model is optimal when network effect is significant. • Implications for software pricing • Very well-written Mingdi Xin Stern School of Business

  5. Suggestions • Commitment to future leasing price • Pricing dynamics • Quality improvement of the future version • Complementary services sales • Subscription-based licensing versus Software-as-a-Service Mingdi Xin Stern School of Business

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