Usage-based or subscription-based? A study on service pricing strategies of internet of vehicles platforms

Purpose To solve the problem of how IoV platforms price the services they provide, we construct a three-tier supply chain, with an upstream IoV platform providing technical services and two alternative pricing models, i.e. the usage-based pricing model or subscription-based pricing model, for two competing smart vehicle manufacturers. The two manufacturers sell smart vehicles to two types of downstream consumers, one of which is an ordinary consumer who cannot provide technical feedback for the manufacturer and the other is a feedback consumer who can provide technical feedback for the manufacturer. Design/methodology/approach We construct a game-theoretic model to obtain the pricing model choices for the dominant and weak manufacturers. Then, we compare different charging models and then derive that the profit of the IoV platform is mainly affected by the technology efficiency of the platform. Findings In the game choice of the two models, we find that when the basic technical service provided by the IoV platform reaches a certain level, both parties will tend to choose the usage-based pricing model. Against the backdrop of the relatively low quality of basic services, manufacturers tend to adopt the subscription-based pricing model to adjust the fee structure based on the quality of the product. Research limitations/implications Particularly importantly, this study breaks through the limitations of the existing literature by going beyond the study of a single manufacturer or the market as a whole to delve into the micro-competitive level between the dominant and weak smart vehicle manufacturers, exploring in-depth the dynamics of their decision-making and investment strategies under different levels of technology. In particular, we emphasize the cooperative game relationship between manufacturers and consumers, revealing how both sides can achieve a win-win situation through the co-creation of value and how this process affects manufacturers’ pricing models and market performance. Practical implications We cleverly set the platform’s technology R&D level, differentiation level and pricing model as key decision variables, which not only reveals the inner mechanism of the market operation but also provides a unique strategic thinking path on how to seek development opportunities and narrow the gap between the dominant manufacturer and the weak manufacturer in the competition. Originality/value This study breaks through the limitations of the existing literature by going beyond the study of a single manufacturer or the market as a whole to delve into the micro-competitive level between the dominant and weak smart vehicle manufacturers, exploring in-depth the dynamics of their decision-making and investment strategies under different levels of technology. In particular, we emphasize the cooperative game relationship between manufacturers and consumers, revealing how both sides can achieve a win-win situation through the co-creation of value and how this process affects manufacturers' pricing models and market performance.