TERRA ECONOMICUS, , Vol. 17 (no. 4),

The paper discusses economic efficiency of mutual aid between competitors in markets for network goods while attaining the critical mass of consumers. Another aspect of reciprocity analyzed in the paper is the supply of free light versions of a good in order to gain loyalty of customers and attract their interest in more advanced versions. Two types of vertical differentiation of network goods are examined: the real one based on the amount of options offered to consumers, and the phantom one – the artificial division of goods into the upmarket category and the normal one. The research method is mathematical modeling. Various formulas are used to describe links between the consumer value of a good and the number of its consumers; between the demanded quantity of a good and its price level; between the distribution of total quantity demanded among competitors and their prices/price elasticity of demand; between the velocity of achieving maximum economic benefit and prices as well as marketing strategies of suppliers. Computer experiments have been used to analyze the role of reciprocity between competitors in achieving such goals as: maximization of net present value of network goods suppliers, minimization of discounted payback period and minimization of period needed to achieve the maximum net present value. The last two goals are essential when new competitors are likely to enter the market. The authors of the paper evaluate the importance of such tools as versioning (supply of light and advanced versions of a good), cooperative strategy of moderately high prices as well as cooperative phantom differentiation when the risk of appearance of new competitors is high.
Citation: Dementiev, V. E., Evsukov, S. G., Ustyuzhanina, E. V. (2019). Reciprocity in emerging markets for network goods. Terra Economicus, 17(4), 23–40. DOI: 10.23683/20736606-2019-17-4-23-40

The article was prepared with the financial support of RFBR (project 17-06-00080) «The comparative analysis of pricing strategies at the network markets based on the economic and mathematical modelling».

Keywords: reciprocity; network goods; pricing; duopoly; differentiation of goods; versioning; pricing strategy

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606