| With the development of information technology and the advancement of society,the degree of consumers’ dependence on software products has increased,and the production and sales scale of software products has also steadily increased.The huge user base indicates that the paid market has a great potential.In order to attract more consumers to become the paying users,software firms have introduced free trial strategies to increase the degree of product diffusion,of which time-limited free strategy and function-limited free strategy are most widely used.Time-limited free strategy means that full-featured version of product is provided free of charge during a limited probation period,and consumers will decide whether to buy them after the trial.Function-limited free strategy means that firms provide users with two versions simultaneously,in which one is the permanent free basic version with only basic functions and services as well as low quality,and the other is the paid value-added version with all functions and services as well as higher quality.These two free strategies are commonly applied in the software industry,which aim to use network externalities to promote product diffusion,reduce users’ uncertainty about product quality,and increase the qualitysensitive consumers’ willingness to pay.However,the price-sensitive consumers confront with the situation that the demand for free is met and the demand for payment is eroded,which brings challenges to firms’ strategy selection and price decision-making.Therefore,this paper takes software product as the research object and explores the issue of free strategy choices of software firms under the influence of consumers’ personal internal preference and network externality.Furthermore,it uses the method of constructing models,constructs consumer utility functions under non-free,time-limited free and function-limited free strategies by means of salience and network externalities,obtains the software firm’s demand and profit function,and finally gives the firm’s optimal profit under different strategies.After comparative analysis,this research puts forward the company’s optimal free strategy under different market conditions,which provides reference for the free strategy selection of software firms.This paper comprehensively considers the influence of consumers’ personal internal preferences and network externalities,and studies the optimal strategy selection and pricing of monopoly software firm and duopoly software firms in a single consumer market.In addition,when there are two types of consumers in the market at the same time,the pricing mechanism selection of software firms implementing unified pricing and discriminatory pricing for different types of consumers under different strategies is also investigated.Apart from that,the optimal pricing mechanism for each free strategy is given.The main research contents and results are as follows.First,considering that consumers’ purchase decision for software products is influenced by personal internal preferences and network externalities,this paper studies the optimal strategy selection of monopoly software firms in quality-sensitive consumer markets and price-sensitive consumer markets.According to the finding,(1)As the level of network externalities becomes strong from weak,if consumers’ unit cognitive increment of product quality units after trial under the time-limited free strategy is greater than their perceived quality before trial,the optimal strategies of software firms are time-limited free,non-free,and function-limited free strategies successively.If the unit cognitive increment is less than the perceived quality,the optimal strategies are time-limited free strategy and function-limited strategy in turn.(2)When the software firm adopts the time-limited free or non-free strategy,the greater the consumer’s sensitivity to quality,the higher the pricing,and the higher the profit.When the software firm adopts the function-limited free strategy,if the level of network externalities does not exceed a certain threshold or surpasses the condition that the pricesensitive market profit is positive,the greater the consumer’s sensitivity to quality,the higher the pricing,and the higher the profit.If the level of network externalities exceeds a certain threshold,but the profit of price-sensitive market is positive,the greater the price sensitivity of consumers,the higher the pricing,and the higher the profit.Then,this paper studies the choice of two software firms between non-free strategy and time-limited free strategy in the duopoly environment,and discusses the influence of network externalities and salience on the game equilibrium results.As shown by results,(1)the effects of network externalities are consistent in different types of markets,namely leading to fierce competition and declining profits.Therefore,when the network externality is strong,the firm’s motivation to increase profits through the time-limited free strategy is enhanced.If consumers have a large difference in perception of product quality between the two firms,the low-quality software firms take the time-limited free strategy first,and then high-quality software firms also take the time-limited free strategy with the further enhancement of network externalities.If the difference in perceived quality is small,high-quality software firms take the lead in adopting the free strategy.(2)The influence of salience in different types of markets is opposite.When consumers tend to be rational in price-sensitive markets and consumers are more sensitive to quality in quality-sensitive markets,software firms have the motivation to adopt time-limited free strategy.(3)When only one firm adopts the free strategy,the longer the limited free time,the greater the damage to the profits of its opponent,and there may be an optimal limit of free time.(4)High-quality software firms should focus on their quality advantages when formulating publicity strategies,and guide their potential customers to focus more on quality,so as to increase prices and profits.Low-quality software firms should guide consumers to be sensitive to price when the perceived quality difference is large,and guide consumers to be sensitive to quality when the difference is small.Furthermore,this paper studies the choice of the two software firms between non-free strategy and function-limited free strategy in the duopoly environment,and discusses the influence of network externalities and salience on the game equilibrium results.According to the research,(1)when consumers are price-sensitive,if consumers are more sensitive to price,it is optimal for both firms not to adopt the free strategy of function restriction.If consumers are less sensitive to price and the quality difference between the paid versions of the two firms is small,only the high-quality software firms adopt the function-limited free strategy.If the quality difference is medium,both firms adopt the function-limited free strategy,but they may fall into the prisoner’s dilemma.If the quality difference is large,only the low-quality firms adopt the function-limited free strategy.(2)When consumers are all quality-sensitive,the situation is just the opposite.(3)The influence of network externalities and salience on the optimal pricing and optimal profit in different markets is also consistent with the influence of network externalities,while the effect of salience is opposite.Finally,this paper investigates the optimal strategy selection and optimal pricing mechanism selection of software firms when there are both quality-sensitive and pricesensitive consumers in the monopoly and duopoly environment.As shown by the result,(1)Whether it is a monopoly software firm or a duopoly firm,when there are both qualitysensitive consumers and price-sensitive consumers in the market,the discrimination pricing mechanism implemented by firms using the salience thinking behavior of consumers is always better than the unified pricing mechanism under the non-free strategy,time-limited free strategy and function-limited free strategy.Meanwhile,there is a proportion of different consumers,which makes the profit difference between the two pricing mechanisms the largest.(2)After a comparative analysis of the three strategies under each pricing mechanism,this paper gives the thresholds for software firms to adopt different strategies under each pricing mechanism,and uses numerical simulation methods to give examples of how software firms should choose strategies under different conditions. |
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