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An analysis of three pricing strategies for digital music products

Author

Listed:
  • Jingxian Chen
  • Liang Liang
  • Samar Mukhopadhyay
  • Dong-qing Yao

Abstract

Digital music albums can be sold either as singles or as a full album, which is not an option for selling physical music products. This paper investigates three pricing strategies for selling digital music albums. The first (strategy S) sets a unified unit price and all songs are sold at this price. The second (strategy F) determines a bundling price for selling the whole album. The third (strategy M) mixes strategies S and F. It offers two prices: one is for a unit song and the other for the whole album. We develop mathematical models for this problem and design enumeration-based iteration algorithms to solve these models for optimality. Through a database consisting of 243 groups of numerical results, we establish a decision tree model, a popular data mining technique, to explain which strategy should be employed under various conditions.

Suggested Citation

  • Jingxian Chen & Liang Liang & Samar Mukhopadhyay & Dong-qing Yao, 2022. "An analysis of three pricing strategies for digital music products," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 73(12), pages 2717-2731, December.
    • Handle: RePEc:taf:tjorxx:v:73:y:2022:i:12:p:2717-2731
    DOI: 10.1080/01605682.2021.2015255
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