Title: Software upgrade, consumer behaviour and software vendor's choice

Authors: Yanbin Tu; Min Lu

Addresses: Department of Marketing, School of Business, Robert Morris University, Moon Township, Pennsylvania, 15108, USA. ' Department of Economics and Legal Studies, School of Business, Robert Morris University, Moon Township, Pennsylvania, 15108, USA

Abstract: This paper investigates the upgrade behaviour of existing software users and new software users under two market structures. We find that keeping the old version in the market is an effective tool to salvage the 'disappearance' demand of software upgrade. The 'cannibalisation' effect between the old version and new version, is different for existing users, compared to new users. We explore the possibility of software vendors utilising price discriminations between existing users and new users as a method to reap higher profit. We find that, for the new software version, the software vendor should offer a price discount to existing users and charge a higher price to new users if the users are sufficiently heterogeneous. For the old software version, a price discount should be offered to existing users with a higher price for new users, if the price of the co-existing new version is high.

Keywords: software upgrades; disappearance demand; consumer behaviour; upgrade choice; software vendors; heterogonous users; upgrade behaviour; price discrimination; price discounts.

DOI: 10.1504/IJTMKT.2012.046432

International Journal of Technology Marketing, 2012 Vol.7 No.1, pp.63 - 94

Available online: 08 Apr 2012 *

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