pricing strategy and innovation incentives for security software theory evidence anindya ghose arun sundararajan leonard n stern school of business new york university aghose nyu edu asundara working paper ceder 05 21 center digital economy research august 2006 we develop an analytical model that presents optimal strategies a multi product firm selling consumer our highlights two aspects unique to this kind the first is supply side effect alters its cost structure due non negligible costs providing updates patches minimize vulnerabilities prevent breaches second demand pooling which accrues from fact customers often get free substitutes components suites in contrast with prior results on information goods predicts optimality mixed bundling as vendors absence these effects leads pure consistent past work another central finding contrary what commonly believed about industries economics actually lead
