IDEAS home Printed from https://ideas.repec.org/p/iek/wpaper/0508.html
   My bibliography  Save this paper

Efficient Capacity Pricing of the Internet Services

Author

Listed:
  • Chang-Ho Yoon

    (Department of Economics, Korea University)

  • Young-Woong Song

    (SK Research Institute for SUPEX Management)

  • Byoung Heon Jun

    (Department of Economics, Korea University)

Abstract

The paper examines the possibilities to improve efficiency in Internet pricing by introducing pre-purchase contract. One can regard pre-purchase market as a device for providing guaranteed services and as an alternative to smart market that can implement expected capacity pricing in an efficient manner. We find that the pre-purchase market tends to discriminate against the consumers who are less certain about their demands. We provide a condition under which the discriminatory effect is overwhelmed by the market force, which discourages the consumers with lower value by high premium. We also suggest a solution to the discriminatory effect.

Suggested Citation

  • Chang-Ho Yoon & Young-Woong Song & Byoung Heon Jun, 2005. "Efficient Capacity Pricing of the Internet Services," Discussion Paper Series 0508, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:0508
    as

    Download full text from publisher

    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0508.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1999. "Information and time-of-usage decisions in the bottleneck model with stochastic capacity and demand," European Economic Review, Elsevier, vol. 43(3), pages 525-548, March.
    2. James D. Dana Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
    3. McKnight, Lee W. & Boroumand, Jahangir, 2000. "Pricing Internet services: after flat rate," Telecommunications Policy, Elsevier, vol. 24(6-7), pages 565-590, August.
    4. Apostolopoulos, Theodore & Courcoubetis, Costas & Cohen, Sandra & Psiakki, Xanthi, 2000. "Multiple incentive internet pricing for national academic research networks: a case study," Telecommunications Policy, Elsevier, vol. 24(6-7), pages 591-611, August.
    5. Shenker, Scott & Clark, David & Estrin, Deborah & Herzog, Shai, 1996. "Pricing in computer networks: Reshaping the research agenda," Telecommunications Policy, Elsevier, vol. 20(3), pages 183-201, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Balázs Lengyel, 2010. "The Hungarian ICT sector - a comparative CEE perspective with special emphasis on structural change," EIIW Discussion paper disbei183, Universitätsbibliothek Wuppertal, University Library.
    2. Miklós Szanyi, 2010. "Industrial Clusters: Concepts and Empirical Evidence from East-Central Europe," EIIW Discussion paper disbei181, Universitätsbibliothek Wuppertal, University Library.
    3. Paul Welfens & Christian Lutz, 2012. "Green ICT dynamics: key issues and findings for Germany," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 24(2), pages 155-163, June.
    4. Paul J.J Welfens, 2010. "European and Global Reform Requirements for Overcoming the Banking Crisis," EIIW Discussion paper disbei180, Universitätsbibliothek Wuppertal, University Library.
    5. Paul J.J. Welfens, 2011. "The Twin Crisis: From the Transatlantic Banking Crisis to the Euro Crisis?," EIIW Discussion paper disbei187, Universitätsbibliothek Wuppertal, University Library.
    6. Paul Welfens & Jens Perret, 2014. "Information & communication technology and true real GDP: economic analysis and findings for selected countries," International Economics and Economic Policy, Springer, vol. 11(1), pages 5-27, February.
    7. Jens K. Perret, 2010. "A Core-Periphery Pattern in Russia - Twin Peaks or a Rat's Tail," EIIW Discussion paper disbei178, Universitätsbibliothek Wuppertal, University Library.
    8. Christian Schröder, 2014. "Dynamics in ICT cooperation networks in selected German ICT clusters," International Economics and Economic Policy, Springer, vol. 11(1), pages 197-230, February.
    9. Balázs Lengyel, 2010. "Regional clustering tendencies of the Hungarian automotive and ICT industries in the first half of the 2000's," EIIW Discussion paper disbei184, Universitätsbibliothek Wuppertal, University Library.
    10. Andrea Szalavetz, 2010. "The Hungarian automotive sector - a comparative CEE perspective with special emphasis on structural change," EIIW Discussion paper disbei182, Universitätsbibliothek Wuppertal, University Library.
    11. Paul J.J Welfens, 2010. "Toward a New Concept of Universal Services: The Role of Digital Mobile Services and Network Neutrality," EIIW Discussion paper disbei177, Universitätsbibliothek Wuppertal, University Library.
    12. Angie Tan, 2014. "Harnessing the Power of ICT and Innovation Case Study Singapore," EIIW Discussion paper disbei201, Universitätsbibliothek Wuppertal, University Library.
    13. Grigori Feiguine & Julia Solovjova, 2014. "ICT Modernization and Globalization: Russian Perspectives," EIIW Discussion paper disbei199, Universitätsbibliothek Wuppertal, University Library.
    14. Tony Irawan, 2013. "ICT and Economic Development:Conclusion from IO Analysis for Selected ASEAN Member States," EIIW Discussion paper disbei192, Universitätsbibliothek Wuppertal, University Library.
    15. Paul J.J. Welfens & Tony Irawan, 2014. "Trade and Foreign Direct Investment: New Theoretical Approach and Empirical Findings for US Exports and European Exports," EIIW Discussion paper disbei204, Universitätsbibliothek Wuppertal, University Library.
    16. Grigori Feiguine & Julia Solovjova, 2013. "ICT Investment and Internationalization of the Russian Economy," EIIW Discussion paper disbei196, Universitätsbibliothek Wuppertal, University Library.
    17. Grigori Feiguine & Julia Solovjova, 2014. "Significance of Foreign Direct Investment for the Development of Russian ICT sector," EIIW Discussion paper disbei198, Universitätsbibliothek Wuppertal, University Library.
    18. Paul J.J Welfens, 2010. "New Open Economy Policy Perspectives: Modified Golden Rule and Hybrid Welfare," EIIW Discussion paper disbei179, Universitätsbibliothek Wuppertal, University Library.
    19. Paul J.J. Welfens, 2014. "Competition in Telecommunications and Internet Services: Problems with Asymmetric Regulations," EIIW Discussion paper disbei205, Universitätsbibliothek Wuppertal, University Library.
    20. Vladimir Udalov, 2014. "Political-Economic Aspects of Renewable Energy: Voting on the Level of Renewable Energy Support," EIIW Discussion paper disbei202, Universitätsbibliothek Wuppertal, University Library.
    21. Paul J.J. Welfens, 2012. "Towards a Euro Fiscal Union: Reinforced Fiscal and Macroeconomic Coordination and Surveillance is Not Enough," EIIW Discussion paper disbei191, Universitätsbibliothek Wuppertal, University Library.
    22. Oliver Emons, 2010. "Innovation and Specialization Dynamics in the Automotive Sector: Comparative Analysis of Cooperation & Application Networks," EIIW Discussion paper disbei186, Universitätsbibliothek Wuppertal, University Library.
    23. Stanislaw Kubielas & Magdalena Olender-Skorek, 2014. "ICT Modernization in Central and Eastern Europe," EIIW Discussion paper disbei197, Universitätsbibliothek Wuppertal, University Library.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Terry E. Daniel & Eyran J. Gisches & Amnon Rapoport, 2009. "Departure Times in Y-Shaped Traffic Networks with Multiple Bottlenecks," American Economic Review, American Economic Association, vol. 99(5), pages 2149-2176, December.
    2. Eden, Benjamin, 2007. "Inefficient trade patterns: Excessive trade, cross-hauling and dumping," Journal of International Economics, Elsevier, vol. 73(1), pages 175-188, September.
    3. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
    4. Jesper Breinbjerg & Alexander Sebald & Lars Peter Østerdal, 2016. "Strategic behavior and social outcomes in a bottleneck queue: experimental evidence," Review of Economic Design, Springer;Society for Economic Design, vol. 20(3), pages 207-236, September.
    5. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 885-915.
    6. Marco Sahm, 2020. "Advance-Purchase Financing of Projects with Few Buyers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(4), pages 909-933, December.
    7. Nocke, Volker & Peitz, Martin & Rosar, Frank, 2011. "Advance-purchase discounts as a price discrimination device," Journal of Economic Theory, Elsevier, vol. 146(1), pages 141-162, January.
    8. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    9. Alexei Alexandrov & Özlem Bedre-Defolie, 2014. "The Equivalence of Bundling and Advance Sales," Marketing Science, INFORMS, vol. 33(2), pages 259-272, March.
    10. Angela Stefania Bergantino & Claudia Capozza, 2015. "Airline Pricing Behavior Under Limited Inter-Modal Competition," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 700-713, 01.
    11. Xuanming Su, 2010. "Optimal Pricing with Speculators and Strategic Consumers," Management Science, INFORMS, vol. 56(1), pages 25-40, January.
    12. Cattaneo, Mattia & Malighetti, Paolo & Morlotti, Chiara & Redondi, Renato, 2016. "Quantity price discrimination in the air transport industry: The easyJet case," Journal of Air Transport Management, Elsevier, vol. 54(C), pages 1-8.
    13. Verhoef, Erik T., 2020. "Optimal congestion pricing with diverging long-run and short-run scheduling preferences," Transportation Research Part B: Methodological, Elsevier, vol. 134(C), pages 191-209.
    14. Fosgerau, Mogens, 2010. "On the relation between the mean and variance of delay in dynamic queues with random capacity and demand," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 598-603, April.
    15. Kenneth Small, 2015. "The Bottleneck Model: An Assessment and Interpretation," Working Papers 141506, University of California-Irvine, Department of Economics.
    16. Nelson, Tim & McCracken-Hewson, Eleanor & Whish-Wilson, Patrick & Bashir, Stephanie, 2018. "Price dispersion in Australian retail electricity markets," Energy Economics, Elsevier, vol. 70(C), pages 158-169.
    17. Yao Cui & Izak Duenyas & Özge Şahin, 2014. "Should Event Organizers Prevent Resale of Tickets?," Management Science, INFORMS, vol. 60(9), pages 2160-2179, September.
    18. Eden, Benjamin, 2009. "Efficient barriers to trade: A sequential trade model with heterogeneous agents," Journal of International Economics, Elsevier, vol. 77(2), pages 234-244, April.
    19. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    20. Benjamin Eden, 2018. "Price Dispersion And Demand Uncertainty: Evidence From U.S. Scanner Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1035-1075, August.

    More about this item

    Keywords

    Network congestion; Pre-purchase; Edge pricing; Smart market; Internet pricing;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iek:wpaper:0508. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kim, Jisoo (email available below). General contact details of provider: https://edirc.repec.org/data/ierkukr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.