Pricing Of Online Education Products Considering Free Audition And Network Externality

Online education has developed rapidly in recent years,although the market has great potential,online education company generally have difficulties in profitability.The main reasons why it is hard to make profits are the poor consumer experience and the lack of acceptance of online education.Consumers are more willing to pay for offline education products.The solution to the problem is to provide free audition courses for consumers to enhance the user experience,to cultivate the habits of using online education products and pay for them.Meanwhile,online education products are full of strong network externality,so the utility gained from online courses increases as total number of users increasing.Online courses can be shared on the Internet through WeChat friends circle,Weibo,etc.It is no doubt that the total number of early users directly affect the utility of potential consumers.In addition,we compare the impact of price commitment strategy and intertemporal pricing to give the optimal pricing strategy for enterprise.Based upon the above information,we study the effect of network externality on market equilibrium and the optimal pricing decisions of enterprises when online education companies offer free audition courses,aiming to provide reference to increase the profits of enterprise.Firstly,we study the two-stage pricing decisions of the single monopoly online education enterprise that provides free audition courses based on price commitment strategy and intertemporal pricing.Moreover,we take the strategic behavior of consumers into consideration.From the perspective of consumer utility,we establish a profit maximization model considering free audition courses,and solve the two-stage equilibrium conditions through game theory.The conclusion is that when free audition courses can bring positive effect to consumers,the optimal price of the two stages and the sales of the first stage increase with the improvement of product quality.Secondly,we establish an extended model considering network externality and analyze the influence of network externality on market equilibrium.Comparing the differences of the optimal price and the maximum profit based on two models,we find that network externality is beneficial to increase the maximum profit and total sales,and price commitment tends to be more valuable when comparing the optimal price and total profits with intertemporal pricing.Finally,as a platform connecting consumers and advertisers,online education enterprise possesses the distinct feature of bilateral market.The enterprise can increase advertising revenue through advertisers while gaining sales revenue through consumers.According to that,we analyze the impact of consumer aversion to advertising on the optimal price and the maximum profit.And draw the conclusion that when consumers are less averse,the enterprise chose to accept advertising can increase the total revenue.