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Managing and modeling the price reduction effect in mobile telecommunications traffic

Author

Listed:
  • Cha, Kyoung Cheon
  • Jun, Duk Bin
  • Wilson, Amy R.
  • Park, Young Sun

Abstract

As needs for telecommunications services diversify, an increasingly wide range of services is becoming available in the market. Service price reduction is one strategy used by service providers to retain existing subscribers. A price reduction for one service, however, can affect the individual-level usage for other services. Price reductions can also be imposed on a service provider by regulation. For these reasons, understanding how price reductions affect service usage is of growing importance to the telecommunications industry for purposes of pricing and tariff development. In this paper, an individual-level usage model for telecommunications services is developed and the effects on usage of a price reduction are analyzed. The model is applied to age-stratified aggregate traffic data for a Korean mobile telecommunication service provider. Finally, a 0-1 integer programming model is proposed for choosing which market segment should be targeted with a price reduction to minimize revenue loss. These models can be applied to market segmentation and price reduction strategy.

Suggested Citation

  • Cha, Kyoung Cheon & Jun, Duk Bin & Wilson, Amy R. & Park, Young Sun, 2008. "Managing and modeling the price reduction effect in mobile telecommunications traffic," Telecommunications Policy, Elsevier, vol. 32(7), pages 468-479, August.
    • Handle: RePEc:eee:telpol:v:32:y:2008:i:7:p:468-479
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    Cited by:

    1. Andreas Deckert & Robert Klein, 2014. "Simulation-based optimization of an agent-based simulation," Netnomics, Springer, vol. 15(1), pages 33-56, July.

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