Competitive Strategies for New Vendors to Launch Basic Products for Free in the Presence of Piracys for New Vendors to Launch Basic Products for Free in the Presence of Piracy

This paper investigates the impact of duopoly competition between advanced and new entrants in the presence of piracy on the pricing strategies of new entrants. By exploring the level of copyright protection of advanced vendors and the transfer cost and network externality factors of the two vendors, the two-stage game model is used to introduce different consumer preferences to derive the optimal timing for the newcomers to enter the competitive market by adopting the freemium model and the impact of the quality level of the newcomers' products on their pricing strategies. The study shows that ethical consumers' preferences are more likely to influence vendors' pricing strategies. When consumers choose advanced vendors' products in the first stage of preference, latecomer vendors can enter the market at a high price to benefit when the newcomer vendors have the greatest gain; if the preference is not chosen, latecomer vendors have to control the quality of products higher than that of the advanced vendors to set a high price to profit after entering the market.