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Pricing Services Subject to Congestion: Charge (2010)
| Content Provider | CiteSeerX |
|---|---|
| Author | Subscriptions, Per-Use Fees Or Sell |
| Abstract | Should a rm charge on a per-use basis or sell subscriptions when its service experiences con-gestion? Queueing-based models of pricing primarily focus on charging a fee per use for the service, in part because per-use pricing enables the rm to regulate congestion- raising the per-use price naturally reduces how frequently customers use a service. The rm has less control over usage with subscription pricing (by de nition, with subscription pricing customers are not charged proportional to their actual usage), and this is a disadvantage when customers dislike congestion. However, we show that subscription pricing is more e¤ective at earning revenue. Consequently, the rm may be better o ¤ with subscription pricing, even, surprisingly, when congestion is intuitively most problematic for the rm: e.g., as congestion becomes more disliked by consumers. We show that the absolute advantage of subscription pricing relative to per-use pricing can be substantial whereas the potential advantage of per-use pricing is generally modest. Subscription pricing be-comes relatively more attractive if consumers become more heterogeneous in their service rates (e.g., some know they are heavyusers and others know they are lightusers) as long as capacity is xed, the potential utilization is high and the two segments have substantially di¤erent usage rates. Otherwise, heterogeneity in usage rates makes subscription pricing less attractive relative to |
| File Format | |
| Publisher Date | 2010-01-01 |
| Access Restriction | Open |
| Content Type | Text |
