On the optimality of fixed-up-to tariff for telecommunications service

Yasushi Masuda, Seungjin Whang

Research output: Contribution to journalArticlepeer-review

38 Citations (Scopus)


A tariff is the total charge payable by a customer for services provided. We study the design of tariffs for a telecommunications service provider. We develop an economic model that captures the negative externalities of the network and the diversity of customers. The tariff is designed so that it reflects the expected response of different customers and the system congestion it would induce. We study a simple tariff structure in wide use by mobile phone carriers - a menu of "fixed-up-to (FUT)" plans like "fixed access fee $35 up to 300 minutes, and $0.40 per minute beyond the limit." We derive the optimal menu of FUT plans and show that such a simple FUT menu structure delivers as good performance to the monopolistic carrier as any nonlinear pricing schedule.

Original languageEnglish
Pages (from-to)247-253
Number of pages7
JournalInformation Systems Research
Issue number3
Publication statusPublished - 2006
Externally publishedYes


  • Menu of plans
  • Nonlinear pricing
  • Queuing delays
  • Tariff design

ASJC Scopus subject areas

  • Management Information Systems
  • Information Systems
  • Computer Networks and Communications
  • Information Systems and Management
  • Library and Information Sciences


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