The role of the distribution platform in price formation of paid apps

Abstract

In this paper we study the role of the distribution platform as an important determinant of price of paid apps. We also examine how the distribution platform influences the price implications of important developers' app-level decisions. To these purposes, we construct a hierarchical model of price formation by using an ad-hoc panel dataset consisting of top paid apps from the two major app stores, namely Apple's App Store and Google Play. Our findings show that prices of paid apps strongly depend on the platform where the apps are marketed. Specifically, the App Store is associated with lower prices for paid apps than Google Play. We find evidence that this is because the impact of cross-store differences in developer competition prevails over the impact of cross-store differences in average consumer willingness to pay. We also find that the price premiums as a return to trialability are more likely to emerge in Google Play than in the App Store, and that developers are more likely to adopt a penetration price policy in Google Play, thus implying an influence of the distribution platform on the price implications of these app-level decisions. Finally, our evidence does not confirm the argument that a more marked price reduction for paid apps embedding ads or generating revenues from other interested third parties should be observed in Google Play.

Mobile consumer behaviour on apps usage: The effects of perceived values, rating, and cost

“…Besides, there are limited studies on mobile apps relating to apps rating and apps cost. Previous studies have found little evidence for the relationship between the apps rating and cost, but the studies have identified that the significance of popularity (most downloaded apps), the role of the distribution platform, trust, and interest in the apps are statistically related to the continuance of apps usage (Roma et al, 2016;Filkenstein et al, 2017;Wu et al, 2017). In particular, Filkenstein et al ( 2017) revealed that non-rated apps tend to be less popular than the rated ones regardless of the apps' cost.…”

“…It was also discovered that there is a strong connection between apps rating and popularity (i.e., the rank of downloaded apps). Roma, Zambuto, and Perrone (2016) mentioned that the most downloaded apps have a high rating, but the trend only applies to free apps. The users are not interested in using non-free apps, including the in-app purchase platform because they will opt for other apps with a similar function at no cost (Bhave et al, 2013).…”

Platform heterogeneity, platform governance and complementors’ product performance: an empirical study of the mobile application industry

“…They are quite sensitive and adaptable to information technology. They pay more attention to the functional design and spend more time on digital products (Min et al 2014;Roma et al 2016). Hence, end-users on strictly regulated platforms have higher brand loyalty and are willing to pay more for their chosen products than those on weakly regulated platforms.…”

“…We set the dummy variable in-app to measure whether the developer chooses to use an in-app purchase strategy or not, which equals to one for adopting the in-app purchase strategy and zero otherwise (Roma et al 2016). It is the first moderator used to test Hypothesis 2, and we also observe the interaction term between in-app and store.…”

“…Enterprise developers have access to abundant technical and human resources and thus can comprehensively develop the functions of mobile applications. They will test and closely track the effect of such functions to satisfy the changing needs of end-users (Roma et al 2016). We define type as a dummy variable, assigned to one for enterprise developer and zero otherwise.…”