How Online Reviews Interact with a Firm?s Free Version Strategy

This study developed a game-theory model to explore interactions between online reviews and free version strategies. Results show that a firm could have four strategies as a strategic tool to respond best to availability of online reviews depending on the relative strength of network effect, cannibalization effect, and dispersed effect. Moreover, when offering a free version is the best strategy both with and without online reviews, online reviews and the free version strategy could still be both complementary and substitutive. This result provides possible theoretical explanations for mixed empirical conclusions regarding whether online reviews complement or substitute free version strategies.

Automated summary

This study developed a game-theory model to explore the interactions between online reviews and free version strategies. The results showed that firms can adopt four different strategies to respond to the availability of online reviews, depending on the relative strength of network effect, cannibalization effect, and dispersed effect. Furthermore, the study found that even when offering a free version is the best strategy, online reviews and the free version strategy can be both complementary and substitutive.