← Search

On the Optimality of Fixed-up-to Tariff for Telecommunications Service

Yasushi Masuda¹; Seungjin Whang²

¹ Keio University · ² Stanford University

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.

DOI

10.1287/isre.1060.0097

Export

BibTeX

Sources

openalex