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Comparative Study on Internet Pricing : Flat-rate vs. Usage-based  

Song, Jae-Do (동양공업전문대학 경영학부)
Publication Information
Korean Management Science Review / v.26, no.1, 2009 , pp. 21-35 More about this Journal
Abstract
There is a controversy on Internet pricing, flat-rate vs. usage-based. This study gives a comparative analysis between flat-rate and two-part tariff which is realistic alternative of usage-based pricing. In a basic economic model, two-part tariff based on ISP's cost structure satisfies allocative efficiency and relatively expand the number of subscribers. But the characteristics of Internet service like consumers' uncertainty on cost, measurement cost of traffic and network externality induce increase of cost or decrease of marginal utility. The analysis shows that small impact of these can make flat-rate more efficient.
Keywords
Internet Pricing; Flat-rate; Usage-based; Two-part Tariff; Uncertainty; Externalty;
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