The Endowment Effect of Freemium Models in Application Software

  • This research paper fills in the gap on the effectiveness of freemium business models by investigating the impact on consumer behavior resulting from the use of a mobile game for a limited period of time. It investigates if the endowment effect can explain the potency of freemium models in application software. This research study is based on experimental design, followed by a survey of hypothetical nature that tests the willingness to pay, enjoyment factor and the Net Promoter Score of two groups of participants: an endowed group and a non-endowed group. Contrary to the initial hypotheses, the results show that the participants endowed with a Feature-Limited-Freemium digital good have a lower Willingness to Pay, a lower enjoyment factor and lower Net Promoter Score compared to the non-endowed group. These findings imply the non-existence of the endowment effect with digital applications. The results underpin the assumption that Time-Limited-Freemium models are more profitable than the Feature-Limited-Freemium models. In addition, the study suggests the development of artificial lock-in mechanisms to enforce loss aversion for freemium software applications in order to increase profitability. The results of the research paper are limited by the fact that the experiments were conducted in artificial conditions and, therefore, the participants might not exhibit the same behavior in life scenarios. Since there are no similar studies, the present research can constitute a benchmark for further considerations.

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Metadaten
Author:Dragomir Popov
Referee:Avo Schönbohm
Advisor:Roland Müller
Document Type:Master's Thesis
Language:English
Date of first Publication:2019/07/29
Publishing Institution:Hochschulbibliothek HWR Berlin
Granting Institution:Hochschule für Wirtschaft und Recht Berlin
Date of final exam:2019/01/23
Release Date:2019/07/29
Tag:Application Software; Consumer Behavior; Endowment Effect; Freemium; Pricing; Value Perception
Page Number:52
Institutes:FB I - Wirtschaftswissenschaften / International Business and Consulting: Human Resource Management M.A.
Licence (German):License LogoUrheberrechtsschutz