Preinstalled application policies of smart device firms

Abstract

Recent technological advancements in smart devices have paved the way for a booming mobile commerce industry. As smart device vendors launch products with a rich variety of business applications, it is critical for all stakeholders to understand the attitudes of different vendors toward preinstalled applications in the smart device industry. We address this issue by exploring an analytical model for preinstalled application policies. Specifically, we study how to choose an optimal policy in a market with hypercritical consumers who have disutility from preinstalled applications, and expert consumers who have removal knowledge. The results show that, as marginal preinstallation income increases, firms tend to force more consumer segments to use preinstalled applications. By comparing monopolistic and competitive situations, we find that the advantages of the policy change are different, and competitive firms prefer to adopt more stringent policies than monopolistic firms when the marginal preinstallation income is smaller. The initiative of expert consumers introduced new findings to the research. The increase in such consumers may lead to an increase in the profits of monopolistic firms when they adopt a preinstallation policy with a low removal threshold, but this has no impact on the profits of competitive firms. Additionally, an increase in such consumers will lead competitive firms to choose to bundle applications when the marginal preinstallation income is smaller and the impact on monopolistic firms’ policy decisions is morecomplex.