How to price 3D-printed products? Pricing strategy for 3D printing platforms

Luoyi Sun, Guowei Hua, T. C.E. Cheng, Yixiao Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

5 Citations (Scopus)

Abstract

3D printing, which is synonymous with the additive manufacturing is gaining popularity, which leads to emergence of 3D printing platforms. The pricing strategies for such platforms are quite complicated, since different kinds of products/services could be provided on the same platform at the same time. We explore the optimal pricing strategy for a 3D printing platform that sells standard and customized products, taking products' differentiation into account, where the platform and designer seek to maximize their profits, while the customer wishes to maximize their utility gained from the product purchase. In the basic model, we derive the platform's optimal prices when the platform allows the designer to add a mark-up for the standard product. We find that the standard product's final price increases with its own quality and decreases with the customized product's quality. When labour cost is low, the customized product's final price increases with its own quality and decreases with the standard product's quality. We also find that the designer's optimal mark-up for the standard product increases with the printing cost of the standard product and quality of the customized product, and decreases with the interaction cost, printing cost of the customized product, and quality of the standard product. We compare the platform's profit in the case of “partial pricing power”, in which the platform allows the designer to add a mark-up, with that in the case of “full pricing power”, in which the platform sets the final price of the standard product and charges a commission fee as its revenue. We find that if the difference in the quality between the standard and customized products is high, then the strategy of charging a commission fee at a rate of more than 25% is more profitable than the strategy of allowing the designer to add a mark-up to the reservation price.

Original languageEnglish
Article number107600
JournalInternational Journal of Production Economics
Volume226
DOIs
Publication statusPublished - Aug 2020

Keywords

  • 3D printing
  • Additive manufacturing
  • Industry 4.0
  • Pricing strategy
  • Vertical differentiation

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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