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Dynamic pricing for subscription services

Author

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  • Fruchter, Gila E.
  • Sigué, Simon P.

Abstract

This paper investigates the use of pricing schemes in subscription services that consist of various combinations of activation, subscription, and cancellation fees. When customers exclusively consider what is directly perceivable, the activation fee starts low and increases as the network grows (penetration strategy), whereas the cancellation fee starts high and decreases as the network grows (skimming strategy). The activation and cancellation fees take various other forms otherwise. The subscription fee remains low at the early stages and increases only when a reasonable number of subscribers is secured. Finally, the authors discuss the theoretical and managerial implications of their findings.

Suggested Citation

  • Fruchter, Gila E. & Sigué, Simon P., 2013. "Dynamic pricing for subscription services," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2180-2194.
    • Handle: RePEc:eee:dyncon:v:37:y:2013:i:11:p:2180-2194
    DOI: 10.1016/j.jedc.2013.05.003
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    References listed on IDEAS

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    Cited by:

    1. Matthias Göcke & Svetlana Fedoseeva, 2016. "Optimal Monopolist Export Pricing with Dynamic Demand and Learning Curve Effects," Open Economies Review, Springer, vol. 27(3), pages 447-469, July.
    2. Mohit Tyagi & Nomesh B. Bolia, 2024. "Optimal pricing of subscription services in the restaurant industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(3), pages 262-273, June.

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