Optimal Bundling Strategy for Cloud Computing Services
Date Issued
2012
Date
2012
Author(s)
Lin, Yi-Ping
Abstract
Like information goods or online services, a cloud computing service has network externality. That is, its value increases with the number of consumers using the service. Quantity discounts may encourage consumers to use cloud computing services. To the best of our knowledge, there is no model dedicated on analyzing bundling strategies of clouding computing services by considering both network externality and quantity discount. Therefore, in this thesis, we propose a model to analyze how the bundling strategies of cloud computing services are affected by network externality, quantity discount, marginal cost, fixed cost, and decreasing rate of marginal price. The proposed model investigates three bundling strategies, namely, pure components (PC), pure bundling (PB) and mixed bundling (MB). The results suggest that the optimal demand and profit increase with the network externality and the decreasing rate of marginal price, and decrease with the fixed cost and marginal cost. PB is optimal with lower decreasing rate of marginal price. Next, MB is more profitable when network externality is low and quantity is high, or when decreasing rate and quantity are high. PC is the optimal strategy when quantity is low and network externality is high. The optimal strategies are different for various market conditions. Therefore, the proposed model may offer service providers to develop the appropriate strategies based on the characteristics of the cloud computing services.
Subjects
bundling strategy
network externality
quantity discount
cloud service
Type
thesis
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