IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

On the Economics of Multicasting

Listed author(s):
  • Yuval Shavitt


  • Peter Winkler


  • Avishai Wool


Registered author(s):

    A supplier of multicast information services will often be faced with the following problem: Broadcasting to the whole customer base (including non-paying customers) is cheaper than multicasting only to the paying customers. However, broadcasting discourages potential customers from paying. The result is an economic game in which the supplier tries to maximize profit in the face of rational, but not omniscient, behavior by customers. In this work we build a model for such environments, which we believe is both reasonably realistic and amenable to mathematical analysis. The supplier's basic strategy is to broadcast every service for which the fraction of subscribed customers exceeds some threshold. The customers do not know the exact threshold value, however they can estimate the perceived probability of getting services for free. We then model the customers' behavior in such a game. From this model, coupled with some mild assumptions on the supplier's cost structure, we can find the optimal setting of the supplier's broadcast threshold. The solution necessarily depends on choosing functions which describe the customers' utility for the offered services; we study in detail several such choices. In all the examples we studied, our model predicts that the supplier's profits will be maximized if the supplier's broadcast threshold is set below 100%. The loss in revenue due to customers subscribing to fewer services is offset by the cost savings made possible by broadcasting the most popular services to all customers. We found our model to be fairly robust with respect to parameter choices. As such, we believe it can be of value to a supplier in devising a multicast/broadcast strategy, and that broadcasting when subscriptions are sufficiently high is likely to be the approach of choice in maximizing profits.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Springer in its journal Netnomics.

    Volume (Year): 6 (2004)
    Issue (Month): 1 (04)
    Pages: 1-20

    in new window

    Handle: RePEc:kap:netnom:v:6:y:2004:i:1:p:1-20
    Contact details of provider: Web page:

    Order Information: Web:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kap:netnom:v:6:y:2004:i:1:p:1-20. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Rebekah McClure)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.