Internet service pricing

Flat or volume?

Jeonghoon Mo, Weonseek Kim, Hosung Park

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

In this paper, we study the pricing of Internet services under monopoly and duopoly environments using an analytic model in which a service provider and users try to maximize their respective payoffs. We compare a few popular pricing schemes, including flat, volume-based, two-part, and nonlinear tariffs, with respect to revenue, social welfare, and user surplus. We perform a study of the sensitivity of these schemes to the estimation errors. In the duopoly situation, we formulate a simple normal form game between two service providers and study their equilibrium behaviors. Our main findings include: (1) the flat pricing generates higher revenue than the pure volume pricing when the elasticity of demand is low; (2) the volume-based pricing is better for society and users than the flat pricing regardless of the elasticity; (3) the market is segmented into two when one provider provides flat pricing and another provides volume based pricing.

Original languageEnglish
Pages (from-to)298-325
Number of pages28
JournalJournal of Network and Systems Management
Volume21
Issue number2
DOIs
Publication statusPublished - 2013 Jun 1

Fingerprint

Internet
Costs
Elasticity
Internet services
Pricing
Service pricing
Error analysis
Service provider
Duopoly
Revenue

All Science Journal Classification (ASJC) codes

  • Information Systems
  • Hardware and Architecture
  • Computer Networks and Communications
  • Strategy and Management

Cite this

Mo, Jeonghoon ; Kim, Weonseek ; Park, Hosung. / Internet service pricing : Flat or volume?. In: Journal of Network and Systems Management. 2013 ; Vol. 21, No. 2. pp. 298-325.
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Internet service pricing : Flat or volume? / Mo, Jeonghoon; Kim, Weonseek; Park, Hosung.

In: Journal of Network and Systems Management, Vol. 21, No. 2, 01.06.2013, p. 298-325.

Research output: Contribution to journalArticle

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