Liquid Pricing for Digital Infrastructure Services
International Journal of Electronic Commerce
The Debate on Net Neutrality: A Policy Perspective
Information Systems Research
Demand Information Sharing in Heterogeneous IT Services Environments
Journal of Management Information Systems
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Market segmentation and price differentiation is considered essential to improve the market efficiency of Internet access and data transport services. The market for cable Internet access exhibits a surprising lack of segmentation, despite a high degree of customer heterogeneity. This article examines the applicability of performance-contingent pricing schemes to broadband Internet access services, with long-term (rather than per-packet) statistical performance guarantees. We study two types of contingent price contracts, with rebate proportional to performance gap, and fixed rebate for below-threshold performance. We show that threshold-performance contingency pricing can increase both profits and fairness (customers who receive higher benefits pay higher effective price) relative to standard pricing. A menu of pricing schemes (allow customers to choose between standard and contingent pricing) works even better: it can increase the firmýs profit and segment the market.