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Efficient Capacity Pricing of the Internet Services

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Author Info
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)

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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.

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Publisher Info
Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0508.

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Date of creation: 2005
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Handle: RePEc:iek:wpaper:0508

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Related research
Keywords: Network congestion; Pre-purchase; Edge pricing; Smart market; Internet pricing;

Find related papers by 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

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References listed on IDEAS
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  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. [Downloadable!] (restricted)
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  2. Jeffrey K. MacKie-Mason & Hal R. Varian, 1994. "Pricing the Internet," Computational Economics 9401002, EconWPA. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-28.

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