Bloatware and Jailbreaking: Strategic Impacts of Consumer-Initiated Modification of Technology Products

AbstractShould a firm selling consumer electronics devices, such as smartphones, bundle these devices with bloatware? If consumers can remove bloatware by jailbreaking these devices, how should the firm adjust its prices and even its decision of bloatware inclusion? This research provides managerial insights for firms considering bloatware and policymakers regulating such practices. We show that it is not always optimal for a firm to sell a bloatware-included product. Furthermore, our analysis reveals that even if the firm can make it harder for consumers to jailbreak, the firm is not always better off by doing so. Consumers do not necessarily benefit from the reduced cost of jailbreaking either. Because the firm passes part of the bloatware revenue to consumers in the form of a lower price, whenever bloatware inclusion benefits the firm, consumers actually also benefit.Many consumer electronics devices are sold bundled with unwanted applications—called bloatware—that provide an additional revenue stream to device manufacturers but deteriorate the value of purchased devices for consumers. Consumers, in response, find technical means to modify purchased devices—called jailbreaking—to remove those applications, thereby reducing the anticipated bloatware revenue for manufacturers. From the perspective of a monopolistic firm that manufactures a consumer electronic device and can preinstall a third-party app for a fee, we investigate whether bloatware inclusion is a viable strategy and how the firm should price its product with bloatware given that consumers can remove bloatware from the product after purchase. We show that it is not always optimal for the firm to sell a bloatware-included product. Furthermore, our analysis reveals that even if the firm can make it harder for consumers to jailbreak, the firm is not always better off by doing so. Consumers do not necessarily benefit from the reduced cost of jailbreaking either. Because the firm passes part of the bloatware revenue to consumers in the form of a lower price, whenever bloatware inclusion benefits the firm, consumers also benefit. Finally, we confirm that our results are robust to alternative modeling assumptions.