We study the strategy of bundling a large number of information goods, such as those increasingly available on the Internet, and selling them for a fixed price. We analyze the optimal bundling strategies for a multiproduct monopolist, and we find that bundling very large numbers of unrelated information goods can be surprisingly profitable. The reason is that the law of large numbers makes it much easier to predict consumers ’ valuations for a bundle of goods than their valuations for the individual goods when sold separately. As a result, this “predictive value of bundling ” makes it possible to achieve greater sales, greater economic efficiency, and greater profits per good from a bundle of information goods than can be attained when the same goods are sold separately. Our main results do not extend to most physical goods, as the marginal costs of production for goods not used by the buyer typically negate any benefits from the predictive value of large-scale bundling. While determining optimal bundling strategies for more than two goods is a notoriously difficult problem, we use statistical techniques to provide strong asymptotic results and bounds on profits for bundles of any arbitrary size. We show how our model can be used to analyze the bundling of complements and substitutes, bundling in the presence of budget

A simple approach, called PMP (Paris Metro Pricing), is suggested for dealing with congestion in packet networks such as the Internet. It is to partition a network into several logical networks, each of which would treat all packets equally on a best effort basis, just as the current Internet does. There would be no formal guarantees of quality of service. The separate networks would differ only in the prices paid for using them. Networks with higher prices would attract less traffic, and thereby provide better service. Price would be the primary tool of traffic management. 1. Introduction The Internet is the great success story of the 1990s. However, endemic congestion has led to wide dissatisfaction, and there is general agreement that new applications, especially real time ones such as packet telephony, will require higher quality of service. Various solutions to data network congestion are being developed, typically involving bandwidth reservation or priority setting. (See [Huit...

Information goods have negligible marginal costs, and this will create possibilities for novel distribution and pricing methods. The main concern of this paper is with pricing of goods that are likely to be consumed in large quantities by individuals. For example, will software continue to be sold at a fixed price for each unit, or will it be paid for on the basis of usage? There is substantial evidence both from observing marketplace evolution and from surveys that customers overwhelmingly prefer subscription pricing. It turns out that even if we ignore this factor, peruse pricing is not a clear winner, and therefore when the preference effect is taken into account, subscription pricing is likely to dominate. We model competitive pricing between two companies that supply essentially equivalent services (such as movies or word processing software). One company charges a fixed fee per unit, while the other charges on a per-use basis. Each is interested in maximizing its revenue. We cons...

The advent of the digital economy and the increasingly important role of various types of electronic market places provide unprecedented opportunity for suppliers of products and services to experiment with new pricing mechanisms and subsequent pricing models. Economic appropriateness, technical feasibility, and purposes of such pricing mechanisms depend mainly on product characteristics, customer groups, sales volume, and eventually the role of the three most important actors, ‘suppliers’, ‘intermediaries’, and ‘consumers’. New information technologies not only enable businesses to charge flexible prices on the Internet, but also allow for new price setting mechanisms in which consumers specify their interests and requirements. This paper provides some conceptual background for developing net-based pricing models and reflects first empirical evidences against it. 1

The advent of the digital economy and the increasingly important role of various kinds of electronic market places provide unprecedented opportunity for suppliers of products and services to experiment with new pricing mechanisms and strategies. Economic appropriateness, technical feasibility, and purposes of such pricing mechanisms depend mainly on product characteristics and the role of intermediaries. In order to allow for advanced, efficient pricing strategies and fast price adjustments on the Web, technologically supported infrastructures and systems are crucial. New information technologies not only enable businesses to charge personalized prices on the Internet, but also allow for new price setting mechanisms in which the consumer specify their interests and requirements. This paper provides some conceptual background for developing net-based pricing strategies and reflects first empirical evidences against it.

Abstract. Information Technology has changed our life and society already to such an extent that even our visions cannot exist without technology and its applications. And this change is accelerating. The Web and the related ecommerce phenomena – as Web based e-commerce – is just the “latest” example of this development. But with respect to e-commerce we should distinguish two things: the (today disappointed) expectations with the related “hype”, and that what really happens. However, this raises several serious difficulties: the problem to identify the current stage of development, the definition of the phenomena we speak about, and finally, what does this mean for the (near) future. Thus, this contribution raises more questions than providing answers. In doing so, I will use the travel and tourism industry as an example. And this highlights one important aspect we shouldn’t forget: Fun. 1.

The way online business is performed will be changed by application service providers (ASPs) and ASP marketplaces (MMM). A fundamental shift can be observed in Corporate Application Delivery: The enterprise applications market is transforming into a rental-based software model coupled with managed services [9]. ASP marketplaces provide alternatives to the classical business model of software which will have a significant impact on the software market [10]. Still, before this kind of ASP marketplaces will become commonplace, several critical research questions have to be answered. The main problem is economical, not technical: Application service providers and ASP marketplaces want to know how to set prices for different customer groups and how to offer digital goods in sizeable versions (product lines) which are fitting to the size of the company and the budget of the consumer. Our goal in this paper is to describe different business models for ASP marketplaces such as MMM....

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with all my love The advent of the Internet and the digitization of music has resulted in a multitude of new challenges and opportunities for the recording industry. So far, sales of digital downloadable music have not compensated for the decrease in CD sales throughout the twentyfirst century. To attract new customers and successfully compete with file-sharing networks, commercial online music services need to meet customer expectations by delivering what they value. Therefore, to increase the understanding of prospective customers, the purpose of this thesis was to explore and describe customer value and target groups within the online music market. Data were collected through a survey of Swedish consumers between 16 and 60 years old. Customer-perceived value of downloadable music, in terms of expected value for money, was found to be quite low. Value could, however, be increased by improving the most important benefits. In addition to fundamental functions, such as

Abstract-Tourist services are one of the most popular products offered online. This has given rise to all service suppliers to offer their products over the Internet. Currently elementary services as hotels, flights or rental cars and travel packages can be booked online. Despite the high interdependence of tourist products there is no possibility for easy and user friendly online bundling of tourist products. In this paper a solution for online bundling of products will be presented based on multi-vendor Electronic Product Catalogs developed with the Q-Technology. I.