Cobb-Douglass Utility Function in Optimizing the Internet Pricing Scheme Model

Abstract: The greater numbers of internet users the greater challenge will be tackled by ISP to provide good services but gain maximum profit. By analyzing Cobb-Douglass utility function we will obtain optimal pricing scheme. Wu and Banker analyzed modified Cobb-douglass utility function and obtained optimal model of flat fee and two part tariff for homogen consumers meanwhile we focus on getting optimal pricing scheme model by using original Cobb-Douglass utility function. The first step to conduct this research is by formulating Cobb-Douglass utility function then analyzing that function. The results show that we obtain optimal pricing scheme model for homogenous and heterogeneous consumer cases. The two-part tariff pricing scheme yield better optimal solution rather than flat fee and two-part tariff pricing scheme regarding with homogen consumers and heterogen consumers based on willingness to pay. For heterogeneous consumers based on consumption level, the optimal pricing scheme is on two-part tariff pricing scheme.

Keywords: utility function, Cobb-Douglass, homogenous consumers, heterogenous consumers

Author: Indrawati, Irmeilyana, Fitri Maya Puspita, Meiza Putri Lestari

Journal Code: jptkomputergg140035

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