The introduction of product upgrades in a competitive environment is commonly observed in the software industry. When introducing a new product, a software vendor may employ behavior-based price discrimination (BBPD) by offering a discount over its market price to entice existing customers of...

In this paper, we model competition between two software product vendors, an incumbent and entrant, with specific focus on the role of switching costs. Contrary to conventional wisdom, we find that under certain conditions the switching costs imposed by the incumbent's product could actually...