CS 891 Economics of Information
Chapter 3: Versioning Information
1 Feb 2006
Presented by:
Karthik L.
(kleelavi@cs.odu.edu)
Anushri Kumar (akuma@cs.odu.edu)
Chapter Summary
The authors illustrate how versioning information can help us create more value for our product:
Company’s offers versions of informational products tailored to the needs of different customers.
This strategy is called Versioning.
 Versioning basically involves adjusting the characteristics of information products to
emphasize differences in what customer’s value. This way the company earns more
revenue as well as offers more value to their consumers.
 The product can be versioned along a variety of dimensions such as delay, user
interfaces, image resolution, and speed of operation, format, capability, features,
comprehensiveness, annoyance and support.
 How many versions?
If the market segments naturally, design your product line to match. While if you don’t
know how many segments are there, three versions is a good choice (just like
Goldilocks). Due to the principle of “extreme aversion” most money is made off the
middle version.
 Making Self-Selection Work
o May need to cut price of high end
o May need to cut quality at low end
 Online and Offline Versions
Understand whether the online version stimulates sales or steals them from the offline
version.
 Pitfalls of Versioning
o We should have the ability to make distinct versions in such a way that we
discourage the high-willingness-to-pay consumers from going for the lower-end
versions
o Make sure users cant easily turn the low-end version into high-end version
 Bundling is a special form of versioning in which two or more distinct products are
offered as a single package. It is of use only if it reduces variation in willingness to pay.
 Customized Bundles lets the consumers build their own bundles.
 Promotional Pricing is in the form of Sales, coupons, rebates .It is useful if it helps you
to segment the market.
Discussion Questions
What is the right way to find out how the market divides?
How do you make sure that making too many versions will not confuse the customers?
Do you prefer to buy products in bundles?
In view of customizable bundles, where is the future of albums in the light of iTunes providing
single for a dollar – your comments
Versioning in the automotive industry which has led to the demise of a few companies – your
comments