Smart Device Product Pricing Based On Platform's Operating System Performance

After the 2015 Global Mobile Internet Conference(GMIC)held in Beijing,theming as "Mobile Everything",all giants at home and abroad in the internet industry gathered together to discuss the future development and cooperation of smart device.This new wave of science and technology innovation and entrepreneurship attract the government great attention,promoting government to provide policy support,encouraging domestic and foreign capital and other industrial resources to invest the smart device platforms which were built by these giants.With implement of intelligent hardware industry chain,the building of large data service platform,and the development of chips,sensors,communications technology,cloud platform,large data and other Internet technology,the traditional hardware,many various devices manufacturers and operating systems devoting into the smart device industry,the smart device market looks forward to the arrival of start-up period.At the same time,the smart device industry has also been widely concerned by domestic and foreign scholars.Domestic scholars have made much qualitative analysis of the smart device industry from the various aspects,such as concept definition,business model,development status,future forecast and suggestion,policies and regulations research,but the quantitative research on the hardware is rarely been studied.In this paper,considering the two-side network externalities in smart device market,establishing the optimal pricing decision model of smart device products based on the principle of maximizing the profit of platform enterprises respectively,this paper analyzes the impact of operating system performance on pricing decisions of two versions of smart device products,the market share,profit of platform enterprises,and what role dose network externality play in these relationships,under two diffident market situations:one-side market and two-side market.In the case of one-sided market,with few APP developers,the platform's pricing decision just need consider the purchase behavior of the consumers,and it is much easier to examine how the operating system performance impact the platform's pricing decision.However,in the case of two-side market,APP developers and Consumers' purchasing decisions both have impacts on platform pricing decision at the same time,and it can be more reasonable to explore the role of network externality by contrasting with one-side market conclusions.The results show that the total market share of smart device products increases with the improvement of operating system performance in both one-side and two-side markets.The total profit of the platform is positively correlated with the performance of the operating system,which means that,the platform enterprise's total profit of two stages increases with the improvement of the operating system performance.In the one-side market,the higher the operating performance of the smart device products,the higher the optimal price of both low and high version products,and the larger the total market share of the two versions products;and the explicit changes in market share of the low and high versions products are related to the quality improvement between the two versions products.This paper elaborates on the impact of quality improvement on the specific market share of the two versions products in the one-side market.If smart device enterprises intend to broaden the high-end market in the future,they should be committed to enhance the quality gap between the low-and high-version products;on the contrary,if smart device enterprises' business target is low-end market,the two versions of product quality gap should be appropriately reduced.In the case of two-side market,the relationship between operating system performance and smart device products pricing is the linear correlation.However,the two-side network externalities strength of smart devices market's impact on products pricing decision is much more complicated.It mainly perform as how the product of two sides network externalities strength impact the linear relationship between the operating system performance and products prices in five regions,which means:the two-side network externalities of smart devices market to a certain degree determines whether the linear relationship between the operating system performance and products prices is positively or negative correlated.Therefore,different from the one-side market that the platform enterprises,business model of purely pursuing considerable profit,the network effect of the two-side platform increases the market share of the two versions products more significantly by increasing users growth speed on both sides of the platform,what means that the two-side platform enterprises can take small profits strategy to obtain higher profits,to maximize the total profits because of network externality.This paper enrichs the theoretical results of the multilayer two-sided platform pricing decision,and provide the theoretical reference for smart device enterprise managers.