This paper investigates profit maximizing pricing strategy of monopolistic network operator in mobile internet market, which consists of network operator (NO), contents provider (CP) and consumers. NO earns revenue from air-time change and share of co...
This paper investigates profit maximizing pricing strategy of monopolistic network operator in mobile internet market, which consists of network operator (NO), contents provider (CP) and consumers. NO earns revenue from air-time change and share of content price. Main result of a simple model is that when quality and quantity of content are stochastically independent ex ante, NO`s optimal pricing is to set air-time charge equal to marginal transmission cost and set the share by trade-off between enhancing CP`s incentive to raise quality and extracting more profit. Therefore, trade of already created information good or content is made efficiently but CP`s are given insufficient incentive to raise quality.