Research On Tariff Equilibrium And Pricing Model Of Telecom Services

The infrastructure functionality of the telecom industry helps the industry become the common external condition of social reproduction and entire social activities, and its extensive external economy makes it play a significant role in promoting the development of the national economy.Focused on the practical problems in China's telecom market, on the basis of a comprehensive analysis on the theory and practice of domestic and international telecom tariff and the regulations, in a way combined with theoretical and empirical analysis, this paper researches the telecom tariff equilibrium and pricing model of telecom services by Game Theory, Marketing, Industrial Economics and Economic Mathematics. It mainly includes 3 parts: the equilibrium of telecom price competition and the possibility of price cooperation; the pricing elements of telecom services, including the influence factors and the trend of the tariff structure; pricing strategies under an effective pricing model.First, based on the price competition game model, this paper finds the reasons of the price wars among telecom operators and gives the Nash Equilibrium point, i.e. (C2+C1/qj,C2+Ci/qj), namely the marginal unit cost of the telecom operator that has a relatively small scale plus its fixed cost per unit. It also shows that the Nash equilibrium point is the reference point of pricing model of telecom services. Meantime, according to the game analysis of price cooperation, this paper reveals the cooperation conditions in infinitely repeated games of price competition of telecom operators. Inevitably, it will be more difficult to maintain monopoly prices with the increasing telecom operators. Price cooperation is a deviation from the equilibrium point. Albeit its unstability, it still has possibility. According to the results of the game analysis, this paper demonstrates that, the regulation on upper and lower limits should be taken in China's telecom industry, so that the price formation mechanism can be achieved, which is mainly determined by the market under government's macroeconomic regulation.Second, based on the conclusions of this paper, combined with related researches by others, we propose the "Influencing Factors Model for Telecom Tariff'.Based on complete information dynamic game, this paper analyzes the market shares of the oligarchic monopoly market of the mobile communication industry before restructuring the telecom industry in 2008; confirms the truth of the analysis conclusion by the actual data; based on the current strength differences of the three telecom operators, predicts that the market shares of China Mobile, China Telecom and China Unicom will be stabilized at the level of 4:2:1 after the restructuring by dynamic game. The paper expounds that under the saturated state of the domestic telecom market, rational competition is a good strategy, and telecom operators in China need to explore the international market actively so as to expand their living space. Although asymmetric regulation subsides on a global scale, we believe it is still necessary to exist in China because of the imbalance in the telecom market structure. The aim of asymmetric regulation is to expand the survival space of the telecom operators on a relatively small scale.Philip Kotler says that when setting prices for telecom services, enterprises should establish a price structure which can reflect the regional demands, costs, market segmentation and other factors. In telecom industry, price structure is tariff structure which includes overall telecom tariff structure and individual telecom tariff structure. Telecom tariff structure is the pricing elements of telecom services. The paper indicates the development trend of telecom tariff structure, and further explains that the government's regulations, technical advance, market competition and other factors are all prompting the telecom tariff structure, which is seriously divorced from the Nash Equilibrium point, to move closer to the Nash Equilibrium point.Third, according to Philip Kotler's classical exposition, this paper deduces that the effective pricing principle of China's telecom operators is "keeping an eye on the competitors, increasing both consumers'benefits and their own profits, and coping with competition actively" which the "cyclic strategy-oriented pricing process" conforms to. The pricing model guided by such an effective pricing principle is a win-win pricing model, with "increasing both consumers'benefits and telecom enterprises' profits". This model centers the consumers and is a positive-sum game between telecom enterprises and consumers.The win-win pricing model can increase the total volume of telecom services, which can increase total social benefit when economy of scale and network externality form positive feedback.According to the win-win pricing model, this paper researches the enterprise-centric pricing strategy and the customer-centric pricing strategy, and specifies the development trend of pricing strategy of telecom services.