Internet Pricing: Best Effort Versus Quality of Service‪.‬

ABSTRACT This research uses Bertrand methodology to examine the influence of competition between companies that utilize Quality of Service (QoS) pricing strategy versus Best Effort (BE) pricing strategy for Internet Service Providers (ISPs). The Bertrand duopoly price competition model is effective at determining customer's willingness-to-pay and level of internet usage patterns in relation to price paid for service. The model also makes use of a two-part tariff consisting of a fixed rate for Best Effort (BE) service, and a usage-sensitive rate structure for premium QoS. Initial results indicate that an equilibrium market position for each ISP depends on a customer's preference for QoS and the price of BE service. Implementation of this research using a game simulation revealed an analytical framework for iterative, short-term, future QoS Internet pricing strategies.