Application service supply chain coordination with free trial

Free trial is a common used strategy in the marketing, which can promote the product or service adoption. In this paper, we examine the free trial strategy used in the service operation management. The free trial strategy is used to deal with uncertain market demand and stimulate the demand in an application service supply chain, which consists of an application service provider (ASP) and an application service infrastructure provider (AIP). We find the free trial can incentive the demand and minimize the risk of the application service supply chain caused by the uncertain market demand. Most importantly, a cost sharing strategy is proposed to make the decentralized supply chain achieve the centralized supply chain´s performance. In addition, numerical example is analyzed to validate the proposed method and to provide more managerial insights.