Optimal pricing of Iphone apps under uncertainty

• Main Author: Low, Hui Ying.
• Other Authors: School of Mechanical and Aerospace Engineering
• Format: Final Year Project
• Language: English
• Published: 2011
• Subjects: DRNTU::Engineering::Systems engineering
• Online Access: http://hdl.handle.net/10356/45931
• Institution: Nanyang Technological University

In recent years, the download of mobile applications has increase tremendously. This project targets on iPhone, one of the smartphones highly sought after in the market right now. An iPhone comes pre-installed with an application, “app store”, which is developed by Apple for users to download other apps, be it game, social networking etc. Apps in the store can either be downloaded for free or at a price. The app may sometimes be overpriced or underpriced by developer as developers are often unsure of how much acceptance they will be able to gain from the end users. This uncertainty will result in developers not being able to maximize their revenue. Pricing the app beyond what the market can accept would mean that the end users would not be willing to purchase it and thus, revenue earned may not be as expected. Pricing the app too low may also mean that developers earn lower revenue. Thus, a model will be created to help the developer to determine the optimal price of an app. The objectives of this project are to help developers to understand the end user market well and to identify the mean and variance of the price that the end users are willing to pay for an app. The understanding of the end users’ behavior will be done through a survey. The survey results were input into the model to create a normal distribution curve. With the curve and the demand for a certain app, the developer will be able to determine the range of price for that app. Analysis is done for a selected app in the App Store using the model created. The study concludes based on the results obtained from the analysis. From the analysis, it can be seen that developers can choose to price their app at a higher price from USD$1.99 depending on the category of app they develop.