Pricing digital content distribution over heterogeneous channels

Abstract

The paper considers the pricing and allocation issues of distributing digital contents via Web and P2P channels. Utilizing a game theoretic model, the allocation equilibrium with respect to various business goals is examined. We find that the P2P channel is always under-utilized in an organization, and present an incentive scheme to achieve an efficient channel configuration. Under a market structure with sequential moves, both channels set higher price and collect higher profit. Particularly, the second mover enjoys higher price and market share. A provider with integrated channels will charge a higher price on the Web channel and the Web channel becomes under-utilized.