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Integrated pricing and capacity decision for a telecommunication service provider

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Abstract

This paper studies a price and capacity decision for a telecommunications service provider that differentiates its products based on price and quality of service to maximize revenue. We assume the market is segmented into two customer classes. Time sensitive customers are willing to pay a price premium for a shorter service time, while price sensitive customers are willing to accept a longer service time in return for a lower price. The service provider offers products and services that differ only in their guaranteed service times and prices. We first develop a mathematical model to determine the optimal product price and optimal capacity necessary for maximizing total profit. We then consider a case where a service provider can marginally increase or decrease the capacity, and compute the optimal price and optimal capacity.

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Acknowledgement

This research was supported by Basic Science Research Program through the National Research Foundation of Korea(NRF) funded by the Ministry of Education, Science and Technology (2009-0068528)

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Authors and Affiliations

  1. Graduate School of Information Management and Security, Korea University, Anamdong 5-ga, Seongbuk-gu, Seoul, 136-713, Republic of Korea

    Ki-sung Hong

  2. Division of Industrial Management Engineering and Graduate School of Management of Technology, Korea University, Anamdong 5-ga, Seongbuk-gu, Seoul, 136-713, Republic of Korea

    Chulung Lee

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  1. Ki-sung Hong
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  2. Chulung Lee
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Correspondence to Chulung Lee.

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Hong, Ks., Lee, C. Integrated pricing and capacity decision for a telecommunication service provider. Multimed Tools Appl 64, 389–406 (2013). https://doi.org/10.1007/s11042-012-1030-3

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