Research on Pricing Models of DM Service: Theory and Application of Two-Sided Markets

DM ("device management") service is a new value- added service whose value chain has the typical characteristics of two-sided markets. Based on a review of the literature on two- sided market theory, the paper discusses pricing models for DM service with two agents on one side, which has not been addressed by previous research. The key to successful implementation of the DM service platform is the development of an optimal pricing strategy, while the key to pricing is to grasp the appropriate price structure between both sides. Considering the enhancement of network externalities and profit- maximization for the DM service platform, three basic pricing models (registration fee model, transaction fee model and two- part tariff model), as well as pricing models at different developmental stages, are discussed. The unit price for every participant is also discussed. This paper shows that using any of the three basic pricing models alone is insufficient. To address this limitation, multiple pricing models should be integrated by considering network size, cross-network externalities, number of transactions and platform matching technology, which are the main factors influencing price levels. The study finds that the unit price is influenced by network scale-utility elasticity and the ratio of network sizes.