Factors influencing the pricing of applications in the Apple App Store: A developers’ perspective

Abstract

Many know how Apple Inc. owes its success in Mobile Commerce to the introduction of the new “App Store” business model. This new market is characterized by the opening to third party mobile apps, which are distributed to consumers through the App Store. This paper investigates factors that might influence the pricing of applications in the Apple Mobile Application Store. By reviewing the existing literature on the issue and analyzing the strategic features characterizing the App Store, we detect three main factors that could influence prices for apps, that is the number of developed apps, the presence of two-sided network externalities and developer’s specialization. An empirical analysis on data from 68,220 apps downloaded from the Italian App Store is used to test the hypotheses. Regression results support our hypotheses. We argue, that even if the research here presented can be considered as a started analysis to the pricing problem in such markets, this work may have important managerial implication for the thousands of developers that are competing in this emerging market.