Title: Understanding the price drivers of successful apps in the mobile app market

Authors: Paolo Roma; Gandolfo Dominici

Addresses: DICGIM – Management and Economics Research Group, Università degli Studi di Palermo, Viale delle Scienze, 90128, Palermo, Italy ' SEAS – Polytechnic School, Università degli Studi di Palermo, Viale delle Scienze, 90128, Palermo, Italy

Abstract: In this paper, we take the perspective of app developers. Specifically, based on a sample of top paid apps from three major app stores, i.e., App Store, Google Play, and Blackberry World, we construct a hedonic price model to examine the role of relevant factors in price formation in the app market. Our results suggest a strong evidence of two-sided market effects. In fact, the lower price charged for apps operating as two-sided markets reflect the strategy of subsidising users, due to the positive cross-side externalities they exert on valuable third parties. Surprisingly, the effects of trialability, in-app purchase and mechanisms to build reputation are not significant in the context of successful apps. Finally, we find weak evidence that developers of top paid apps prefer price skimming to penetration price strategies.

Keywords: mobile app market; online distribution; pricing strategies; two-sided markets; price drivers; successful apps; mobile apps; hedonic price models.

DOI: 10.1504/IJEMR.2016.077121

International Journal of Electronic Marketing and Retailing, 2016 Vol.7 No.2, pp.159 - 185

Received: 08 Oct 2015
Accepted: 14 Nov 2015

Published online: 18 Jun 2016 *

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