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Bandwidth allocation and pricing problem for a duopoly market

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This paper develops constrained nonlinear programming to deal with this problem for two competitive ISPs. The condition for reaching the equilibrium between the two competitive firms is derived. The market equilibrium price and bandwidth resource allocations are derived as closed form solutions. | Yugoslav Journal of Operations Research 21 (2011), Number 1, 65-78 DOI: 10.2298/YJOR1101065Y BANDWIDTH ALLOCATION AND PRICING PROBLEM FOR A DUOPOLY MARKET Peng-Sheng YOU Graduate Institute of Marketing and Logistics/Transportation, National ChiaYi University, Taiwan Chun-Chieh LEE Graduate Institute of Marketing and Logistics/Transportation, National ChiaYi University, Taiwan Yi-Chih HSIEH Department of Industrial Management, National Formosa University,Taiwan Received: July 2008 / Accepted: May 2011 Abstract: This research discusses the Internet service provider (ISP) bandwidth allocation and pricing problems for a duopoly bandwidth market with two competitive ISPs. According to the contracts between Internet subscribers and ISPs, Internet subscribers can enjoy their services up to their contracted bandwidth limits. However, in reality, many subscribers may experience the facts that their on-line requests are denied or their connection speeds are far below their contracted speed limits. One of the reasons is that ISPs accept too many subscribers as their subscribers. To avoid this problem, ISPs can set limits for their subscribers to enhance their service qualities. This paper develops constrained nonlinear programming to deal with this problem for two competitive ISPs. The condition for reaching the equilibrium between the two competitive firms is derived. The market equilibrium price and bandwidth resource allocations are derived as closed form solutions. Keywords: Duopoly market; equilibrium price; service quality; bandwidth allocation. MSC: 91B24 1. INTRODUCTION Two of the most popular technologies that offer speedy access to surf the Internet are the DSL (Digital Subscriber Line) broadband and the cable Modem. DSL 66 P.S. You, C.C. Lee, Y.C. Hsieh/ Bandwidth allocation and pricing problem service provides Internet access over a single dedicated telephone line, while Cable broadband service provides Internet access over a cable television line. The .