Optimality of versioning for information products using Niching SSGA

Abstract

Information products are the most typical products in E-business, and versioning strategy is widely used in the information industry. This paper focuses on the numerical investigation of versioning strategy for information products under piecewise linear utility function and continuously distributed customers in the monopolist market. The utility function adopted in this paper is a piecewise linear function of the product quality that captures more exactly the valuation of customers on information products. Information products are differentiated along two quality dimensions in our model. Moreover, a Niching steady-state genetic algorithm (Niching SSGA) is introduced to obtain numerical solutions of the optimization problem that is analytically intractable. Numerical experiments verify that with piecewise linear utility function the monopolist has greater incentive to distribute more versions of different quality levels when customers become less tolerant to quality degradation, and the firm could obtain more profit from multi-version schemes. © 2012 Springer-Verlag Berlin Heidelberg.