Pricing Digital Products with Cost and Competition Considered in Electronic Commerce

Pricing digital products in electronic commerce should use dynamically a weighted linear additivity model to reflect their features especially the cost and consider the competitors' pricing policy.According to the characteristics of time/fashion/(price-dependent) demand,a sale model of digital products was developed with relevant algorithms described in detail.Some simulations were conducted to maximize the profit in an on-line market.The results showed that the pricing scheme based on the model considering both cost and competition is preferable to that based on the model only considering competition or cost,and the convergence rate of optimal price and computational efficiency of the model we developed is quite applicable.The model therefore provides a feasible solution for pricing digital products.