Abstract
Mobile application (app) developers usually face challenges in product offering decisions. Our research develops an analytical framework to address a product offering problem that app developers face when introducing paid or free apps in a two-platform market. We provide optimal conditions and platform decisions for each strategy (in single and two platforms) by providing a framework for offering either a paid or a free app. When offering a paid app, we identify platforms’ willingness-to-pays, user densities, and platform-specific app-launching costs as key factors that determine platform selection strategy; if a free app is considered, users’ disutility sensitivity to advertisement is an extra factor for app developers to consider. The developer's intrinsic capability and the app's nature form the quality upper bound for the app. When the quality upper bound is low and users are less sensitive to advertisement, these apps are often offered free in the app market. We find that if users’ disutility sensitivities to advertisements are small, introducing a free app is preferable to a paid app.
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