In this paper, we consider revenues of the NSP (network service provider) when there exists a "congestion externality." In particular, we compare revenues obtained using a flat price and two-part tariff and analyze the effect of congestion on the revenue loss when using a simple entry fee in lieu of the two-part tariff. Previous study has shown that when there is no delay disutility the revenue loss is small, which leads to a low "Price of Simplicity." However, in this study, we show that in an extreme case where all users are identical, the price of simplicity is substantial. Then we consider a more practical scenario where users have different preferences, and show that even in this case, under congestion externality, the price can be extremely high.
All Science Journal Classification (ASJC) codes
- Computer Networks and Communications
- Electrical and Electronic Engineering