Comparison of Internet Service Tariffs

In this paper, we study the pricing of Internet services under monopoly and duopoly environments using a game-theoretic model in which a service provider and users all try to maximize their payoffs. First, we compare a few popular pricing schemes, including flat, volume-based, two-part and nonlinear tariffs with respect to revenue, social welfare and user surplus. We perform a sensitivity study of these schemes to the estimation errors. In the duopoly situation, we formulate a simple normal form game between two service providers and study their equilibrium behaviors. Finally, we consider universal service for Internet service and its impacts on subscribership.