Versioning

DEFINITION of 'Versioning'

A business practice in which a company produces different models of the same product, and then charges different prices for each model. Versioning a product gives the consumer the option of purchasing a higher valued model for more money or a lower valued model for less money. In this way, the business is attempting to attract higher prices based on the value a customer perceives.


Also known as "quality discrimination".

BREAKING DOWN 'Versioning'

This is usually done when a product has large fixed costs of production and small variable costs. For example, in software packages, features are added or taken away to give different versions and price points. Having different options will accommodate different utilities of the consumers. It is based on the willingness to pay of the customer; a higher willingness to pay will result in the purchase of the higher quality product, and a lower willingness to pay will result in the purchase of the lower quality product.

RELATED TERMS
  1. Model Risk

    A type of risk that occurs when a financial model used to measure ...
  2. Hull–White Model

    A single-factor interest model used to price derivatives. The ...
  3. Abnormal Earnings Valuation Model

    A method for determining a company's worth that is based on book ...
  4. Lattice-Based Model

    An option pricing model that involves the construction of a binomial ...
  5. Black Scholes Model

    A model of price variation over time of financial instruments ...
  6. Trinomial Option Pricing Model

    An option pricing model incorporating three possible values that ...
Related Articles
  1. Entrepreneurship

    2 Key Tactics Retailers Use To Increase Sales

    Many companies use versioning and bundling to increase sales. These strategies can offer value to consumers, but they also mean higher costs.
  2. Trading Systems & Software

    Build a Profitable Trading Model In 7 Easy Steps

    Trading models can provide a powerful tool for building profit. Traders can use and customize existing trading models or build an original model. This article provides seven steps to building ...
  3. Entrepreneurship

    Calculating (Small) Company Credit Risk

    Determining creditworthiness of smaller and medium-sized corporations isn't as easy as for larger companies, but these tips can help.
  4. Investing

    Understanding Financial Models

    A financial model is a representation of some aspects of a firm or given security. It uses historical numbers to create calculations that inform financial recommendations or predict future financial ...
  5. Options & Futures

    Options Pricing: Modeling

    Option traders utilize various option price models to attempt to set a current theoretical value. Models use certain fixed knowns in the present – factors such as underlying price, strike ...
  6. Professionals

    The Best Financial Modeling Courses for Investment Bankers

    Obtain information, both general and comparative, about the best available financial modeling courses for individuals pursuing a career in investment banking.
  7. Personal Finance

    4 New Business Models That Are Here To Stay

    When it comes to thriving in business, it's out with the old and in with the new.
  8. Options & Futures

    Breaking Down The Binomial Model To Value An Option

    Find out how to carve your way into this valuation model niche.
  9. Options & Futures

    How To Build Valuation Models Like Black-Scholes (BS)?

    Want to build a model like Black-Scholes? Here are the tips and guidelines for developing a framework with the example of the Black-Scholes model.
  10. Options & Futures

    The "True" Cost Of Stock Options

    Perhaps the real cost of employee stock options is already accounted for in the expense of buyback programs.
RELATED FAQS
  1. What is the difference between financial forecasting and financial modelling?

    Understand the difference between financial forecasting and financial modeling, and learn why a company should conduct both ... Read Answer >>
  2. Why are microeconomic models different in the short run than the long run

    Find out why short-run and long-run microeconomic models treat production, costs and variable change using different given ... Read Answer >>
  3. How do subscription business models work?

    Understand how a subscription business model works and why companies prefer a subscription business model over a traditional ... Read Answer >>
  4. How is implied volatility for options impacted by a bearish market?

    Learn why implied volatility for option prices increases during bear markets, and learn about the different models for pricing ... Read Answer >>
  5. What are some examples of different corporate governance systems across the world?

    Read about the three major types of corporate governance systems: the Japanese model, the Anglo-Saxon model and the continental ... Read Answer >>
  6. What technical skills must one possess to trade options?

    Learn about the technical skills required to trade options and how mathematical and computer science skills give you a better ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center