On the optimality of fixed-up-to tariff for telecommunications service

Yasushi Masuda, Seungjin Whang

Research output: Contribution to journalArticle

31 Citations (Scopus)

Abstract

A tariff is the total charge payable by a customer for services provided. We study the design of tariffs for a telecommunications service provider. We develop an economic model that captures the negative externalities of the network and the diversity of customers. The tariff is designed so that it reflects the expected response of different customers and the system congestion it would induce. We study a simple tariff structure in wide use by mobile phone carriers - a menu of "fixed-up-to (FUT)" plans like "fixed access fee $35 up to 300 minutes, and $0.40 per minute beyond the limit." We derive the optimal menu of FUT plans and show that such a simple FUT menu structure delivers as good performance to the monopolistic carrier as any nonlinear pricing schedule.

Original languageEnglish
Pages (from-to)247-253
Number of pages7
JournalInformation Systems Research
Volume17
Issue number3
DOIs
Publication statusPublished - 2006

Fingerprint

Telecommunication services
Mobile phones
telecommunication
customer
Economics
Costs
economic model
fee
service provider
pricing
performance
Optimality
Tariffs
Menu

Keywords

  • Menu of plans
  • Nonlinear pricing
  • Queuing delays
  • Tariff design

ASJC Scopus subject areas

  • Library and Information Sciences

Cite this

On the optimality of fixed-up-to tariff for telecommunications service. / Masuda, Yasushi; Whang, Seungjin.

In: Information Systems Research, Vol. 17, No. 3, 2006, p. 247-253.

Research output: Contribution to journalArticle

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