Bandwidth allocation and pricing problem for a duopoly market

Authors

  • Peng-Sheng You Graduate Institute of Marketing and Logistics/Transportation, National Chia Yi University, Taiwan
  • Chun-Chieh Lee Graduate Institute of Marketing and Logistics/Transportation, National Chia Yi University, Taiwan
  • Yi-Chih Hsieh Department of Industrial Management, National Formosa University, Taiwan

DOI:

https://doi.org/10.2298/YJOR1101065Y

Keywords:

Duopoly market, equilibrium price, service quality, bandwidth allocation

Abstract

This research discusses the Internet service provider (ISP) bandwidth allocation and pricing problems for a duopoly bandwidth market with two competitive ISPs. According to the contracts between Internet subscribers and ISPs, Internet subscribers can enjoy their services up to their contracted bandwidth limits. However, in reality, many subscribers may experience the facts that their on-line requests are denied or their connection speeds are far below their contracted speed limits. One of the reasons is that ISPs accept too many subscribers as their subscribers. To avoid this problem, ISPs can set limits for their subscribers to enhance their service qualities. This paper develops constrained nonlinear programming to deal with this problem for two competitive ISPs. The condition for reaching the equilibrium between the two competitive firms is derived. The market equilibrium price and bandwidth resource allocations are derived as closed form solutions.

References

Bapna, R., Goes, P., Gupta, A. (2005) Pricing and Allocation for Quality-Differentiated Online Services. Management Science, 51(7): 1141-1150

Basar, T., Srikant, R. (2002) Stackelberg games and multiple equilibrium behaviors on network. Journal of Optimization Theory and Applications, 115(3): 479-490

Choi, C.S. (1996) Price competition in a duopoly common retailer channel. Journal of Retailing, 72(2): 117-134

Dai, Y., Chao, X., Fang, S., Nuttle, H. (2005) Pricing in revenue management for multiple firms competing for customers. International Journal of Production Economics, 98(1): 1-16

de Palma, A., Leruth, L. (1993) Equilibrium in competing networks with differentiated products. Transportation Science, 27(1): 73-80

Elberfeld, W., Wolfstetter, E. (1999) A dynamic model of Bertrand competition with entry. International Journal of Industrial Organization, 17(4): 513-525

Foros, Ø., Hansen, B. (2001) Competition and compatibility among Internet Service Providers. Information Economics and Policy, 13(4): 411-425

Harrington, J. (1995) Experimentation and Learning in a Differentiated-Products Duopoly. Journal of Economic Theory, 66(1): 275-288

Mason, R. (2000) Simple competitive Internet pricing. European Economics Review, 44 (4-6) 1045-1056

Min, T., Kim, S.Y., Shin, C., Hahn, M. (2002) Competitive nonlinear pricing with product differentiation. International Review of Economics & Finance, 11(2): 155-173

Peha, J.M., Tewari, S. (1998) The results of competition between integrated-services telecommunications carriers. Information Economics and Policy, 10(1): 127-155

Stone, C.J. (1996) A Course in Probability and Statistics. Duxbury

Symeonidis, G. (2003) Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D. International Journal of Industrial Organization, 21(1): 39-55

Downloads

Published

2011-03-01

Issue

Vol. 21 No. 1 (2011)

Section

Research Articles

License

Copyright (c) YUJOR

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.