The effect of risk aversion and financing source on a supply chain of in‐app products

Abstract

Abstract We study the decisions of a distribution platform and an app developer, both risk averse, which interact via a revenue‐sharing contract under the freemium business model with optional in‐app purchases. The model considers the random impact of quality on the demand potential of an in‐app product, and we conduct the analysis under the mean‐variance framework. We investigate two financing sources for the developer's activity: self‐financing and revenue‐based financing by an external investor. We reach three main findings: (i) The stochastic‐dominance property exists both for the platform's and the investor's profits with regard to their revenue shares; (ii) the more risk averse the developer is, the more he tends to use revenue‐based financing, but he will receive a lower financing amount; and (iii) the shift from self‐financing to revenue‐based financing lowers the platform's expected revenue.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 31 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.