The firm can offer different versions to different groups, illustrating the dimensions for versioning the information...

The firm can offer different versions to different groups, illustrating the dimensions for versioning the information goods.

Expert Solution

Versioning of information goods refers to the profit maximizing strategy adopted by producers of an information good like a digital library or a paid online forum in which the seller offers different versions of the same product to different consumer groups depending on their willingness to pay and preferences. When the seller has complete information regarding the willingness to pay for each group, he sells different versions of the product at different prices. This is based on first degree price discrimination. On the other hand, when the seller does not have full information on consumer preferences, he segregates the information good based on quality. Those who are able to pay more will buy the better quality product and others will buy the lower quality product. By segregation of consumers in this way, the producer is able to maximize his profits by appropriating the consumer surplus of the consumers.

Rahul Sunny answered 1 year ago

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