Date Added: Dec 2010
This paper examines the situation in which a monopolist offers freeware as an advertisement to increase the demand in order to maximize profit even though the existence of such freeware will reduce the power of the monopolist in the market. The authors prove that the successful application of freeware is dependent on the number of potential consumers and there exists an optimal quality design for freeware in this situation. "Freeware" is very frequently observed in software markets. For example, "Logmein", a web-based computer-remote-control service, provides some services for free but offers other services for paying customers.