Free products can boost profits and reshape competitive strategies in tech.
Firms can increase profits by giving away products for free through strategic product design. By offering free complements, a firm can boost its own profits, while free substitutes can harm competitors. The model suggests that investing in free products can be profitable, especially in markets with high demand for complementary goods. Firms can choose to offer free goods to content-providers or end-consumers based on market elasticities. This strategy allows firms to maximize profits by leveraging network effects and externalities. The research highlights the importance of considering complex market interactions for successful information product design and profit maximization.