Subsidy and Revenue Maximization in Developing Countries

Developing countries have embarked on the promotion of “ICT access for all” through subsidized Information and Communication Technologies (ICTs), especially in underserviced areas of such countries. The main aim of the “ICT access for all” is to extend the communication services to the large areas of underserviced regions through subsidized communication services. In some instances, subsidies may lead to high ICT penetration and high resource utilization while in some instances unsubsidized services may lead to low utilization of resources and low ICT penetration, which may eventually lead to market failure and destroy market efficiency. With explicitly defined objectives, regarding subsidy policy, however, developing countries always fall short on the implementation of such subsidy policy due to economic reasons and unrealistic subsidy driven pricing models. In this paper we investigate the impact of subsidy driven pricing model on resource utilization and revenue maximization in a developing country. In this paper we try to find a middle ground between promoting “ICT access for all” (given a subsidy and diverse income variations between the groups) and resource utilization in a network.