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An Analysis of Usage-Based Pricing Policies for Smart Products

Frederic Thiesse & Moritz Köhler

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versione breve This contribution concerns itself with the potential of Usage-Based Pricing policies for smart products. We develop an analytical model of a supplier of machines and his customer that allows us to compare Usage-Based Pricing to a traditional scheme with fixed prices, and to determine optimal solutions for both parties. Based on these findings, we discuss the value of Usage-Based Pricing on an operational as well as on a strategic level. The main conclusion that can be drawn from our research is that Usage-Based Pricing does not provide any additional value that could not also be achieved by information sharing and joint price optimization. From a more strategic perspective, however, we find that the transfer of demand risk from the customer to the supplier implied by Usage-Based Pricing might be used as a strategic tool to attract new prospects and to enter new markets, but only to a lesser extent as a means to keep existing customers.
   
tipo Journal paper
   
parole chiave Pricing, Sensor Technology, Ubiquitous Computing, Smart Products, Revenue Management, Yield Management
   
lingua English
kind of paper journal article
data di apparenza 1-8-2008
giornale Electronic Markets
Editore Springer (Heidelberg)
ISSN 1019-6781
edizione del giornale 18
numero del giornale 3
pagine 232-241
review double-blind review
   
citation Thiesse, F., & Köhler, M. (2008). An Analysis of Usage-Based Pricing Policies for Smart Products. Electronic Markets, 18(3), 232-241.