How Freemium Gets Consumers to Pay a Premium: The Role of Loss-Aversion

  title={How Freemium Gets Consumers to Pay a Premium: The Role of Loss-Aversion},
  author={Nishant Mishra and Sajjad Najafi and Sami Najafi Asadolahi and Andy A. Tsay},
  journal={Computing Technologies eJournal},
  • Nishant Mishra, Sajjad Najafi, +1 author Andy A. Tsay
  • Published 2017
  • Business
  • Computing Technologies eJournal
  • We consider the optimal pricing of a freemium product offered by a firm to consumers who are loss-averse with stochastic and endogenous reference points, and the role of the consumers' surprise on their purchase decision about the premium version, after experiencing the free version. We formulate the problem as a multistage Stackelberg game and investigate its equilibrium by determining the consumers' optimal purchase plan, the firm's optimal price to charge for the premium version, and the… CONTINUE READING


    Publications referenced by this paper.
    A Model of Reference-Dependent Preferences
    • 2,174
    • Open Access
    Prospect theory: An analysis of decision under risk Econometrica 47
    • 21,161
    • Open Access
    Experimental Tests of the Endowment Effect and the Coase Theorem
    • 3,220
    • Open Access
    Strategic Capacity Rationing to Induce Early Purchases
    • 395
    • Open Access
    Dynamic Pricing Strategies with Reference Effects
    • 306
    • Open Access
    Competition and Price Variation When Consumers Are Loss Averse
    • 266
    • Open Access
    Dynamic Pricing with Loss-Averse Consumers and Peak-End Anchoring
    • 146
    • Open Access
    Regular Prices and Sales
    • 109
    • Open Access
    Strategic Customer Behavior, Commitment, and Supply Chain Performance
    • 214
    • Open Access