Journal of Evolutionary Economics

, Volume 11, Issue 2, pp 231–248 | Cite as

Optimal freeware quality in the presence of network externalities: an evolutionary game theoretical approach

  • Ernan Haruvy
  • Ashutosh Prasad
Original paper


New software products often face difficulty in achieving market penetration. A potential remedy is to offer a freeware version of the software to encourage initial adoption and establish a larger user base for the software, thereby increasing the commercial version's value to adopters in future periods. However, to avoid complete cannibalization of the commercial version, the freeware version's quality must be sufficiently low and the price of the commercial version must not be too high. We model the effect of these two decision variables, price and freeware quality, on the adoption of software using static and evolutionary game theory.

Key words: Network externalities – Freeware – Evolutionary dynamics 
JEL classification: L1 <!-ID=""Correspondence to: A. Prasad --> 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2001

Authors and Affiliations

  • Ernan Haruvy
    • 1
  • Ashutosh Prasad
    • 2
  1. 1.Faculty of Industrial Engineering and Management, Technion, Haifa 32000, Israel IL
  2. 2.School of Management, The University of Texas at Dallas, Richardson, TX 75083-0688, USA(e-mail: US

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