Support Forums and Software Vendor's Pricing Strategy

This research develops a micro-economic model to study the impact of support forums on the software industry. Motivated by the rapid growth of forums such as Stack Exchange, Quora, and Yahoo! Answers, we examine what impact they could have on a software vendor. Since these forums provide an alternative, free source for obtaining software support, one might suspect that this "shadow" competition eats into the profit of the vendor. We find that, while such a conclusion could be right at the initial stages of the forum's entry into the market, it may not be true in the later stages, especially if the forum generates enough momentum. This is because forums, besides playing a substitutive role, also have a complementary effect. At the initial stages, the substitutive role of the forum dominates. However, eventually, if and when the forum grows sufficiently, the complementary role takes control. In the mean time, the vendor can try to mitigate the immediate losses and find temporary relief by adopting a strategy of bundling support services with the product