Journal of Management Information Systems

Volume 24 Number 3 2007 pp. 79-108

Price Mechanism for Knowledge Transfer: An Integrative Theory

Ming-Hui, Huang, Wang, Eric T G, and Seidmann, Abraham

ABSTRACT: Knowledge transferred in the open market via a price mechanism enjoys the benefits of avoiding internal competition, learning from external competitors, and accumulating diversified knowledge. In the market, users can access a repository of knowledge for a single price (repository pricing) or knowledge items in the repository can be sold individually (knowledge pricing). However, users have been found to prefer repository pricing but not the knowledge in the repository. This irrationality can cause market failure because users derive a suboptimal level of utility from the knowledge repository, and vendors have contradictory pricing and knowledge strategies. We empirically examine a joint explanation from two competing theoretical perspectives that accounts for this inconsistency nicely: The mental accounting perspective endorses repository pricing because it entices users with the benefits of the whole repository, whereas the transaction decoupling perspective finds expression in individually priced knowledge because it prevents the discrete benefit of knowledge from becoming obscure. By integrating the two theoretical perspectives and considering price, knowledge, and user characteristics simultaneously, the results offer important implications for the market transfer of knowledge. Repository pricing attracts users and is essential to initiate the transfer process, whereas knowledge pricing generates knowledge preference and is thus an effective approach for learning.

Key words and phrases: knowledge market, knowledge pricing, knowledge transfer, mental accounting, multinomial logit model, ordered logit model, transaction decoupling