Individual Tariffs for Mobile Services: Bargaining Model and Calculation H. Chen; L-F Pau Rotterdam School of Management, Erasmus University {hchen, lpau}@rsm.nl Abstract This paper aims to develop a bargaining model for calculation of individual tariffs for mobile service bundles. The paper first looks shortly at the intrinsic drivers of individual tariffs both from sociological and economic perspectives. It proceeds with a bargaining model for individual tariffs which is centered on user and supplier behaviours. The user, instead of being fully rational, has “bounded rationality” and his behaviours are not only subject to economic constraints but also influenced by social needs. Individual tariffs are decided through interactions between the user and the supplier. Game theory is employed to provide structured analyses of the interactions and tariff design. Preliminary results, which are based on a music training service, show that individual tariffs can be beneficial to both the user and the supplier. 1. Introduction Individual tariffs existed at the dawn of the telecom history. Due to the limited supply and demand, tariffs were negotiated between the individuals and the telephone companies. Individual tariffs faded out when telecom industry began to thrive in the early 20th century under economies of scale. Users started to pay same prices for standard services. But both on supply and demand sides, the power of individuals is rising. It is high time that the “customer- specific tariffs”, based on personalized services, be extended to individual users and not just reduced to some corporate customers in telecom industry. This paper aims to develop a bargaining model for the computation of individual tariffs. The ultimate goal is to provide a tool so that the determination processes of individual tariffs are automated or semi-automated and the prohibitive tariff provisioning overhead is avoided. 2. Basic concepts In order to define individual tariffs, the opposite is defined first. Public tariffs in telecommunication refer to the regulatory protected ability for an identified user to obtain from a service provider, by a bilateral contract, a set of standard prices for a set of standardized services. Public tariffs are common practice of current incumbent telecom operators. The number of services is limited and so are the choices of tariffs. There is no interaction between operators and customers when signing contracts. A customer has to choose one category of services and tariffs which fit his needs best or reject the offer. The limited segmentation leaves a significant amount of demands from the users unsatisfied. Individual tariffs in telecommunications refer to the regulatory protected ability for an identified user to obtain from a service provider, by a bilateral specific contract, a set of service specific prices corresponding to a request or a proposal from the user specified with a service demand profile and some duration. 3. Drivers and bargaining model of individual tariffs 3.1. Intrinsic drivers of individual tariffs Not all individual users are willing to consider personalized services and tariffs. Some prefer a pre- determined bundle with little transparency and limited choices. But there are values held by a growing population inviting personalized services and individual tariffs. Here is a non-exhausted list of drivers that we consider to be fundamental. Individualism. According to Hayek [1], there are universally accepted principles under which man makes his own choices and take full responsibility; he is free to follow his own will, to make full use of his knowledge and skill, and he is guided by his concerns for the particular things of which he knows and he cares. Personalized mobile services and tariffs are IEEE International Conference on Services Computing (SCC'06) 0-7695-2670-5/06 $20.00 © 2006