Understanding the impact of loyal user behaviour on Internet access pricing: a game-theoretic framework

In this paper, we investigate the impacts of user behaviour—user loyalty in particular—on pricing strategies of Internet Service Providers (ISPs) for a profitable yet sustainable Internet access marketplace. We carry out an extensive empirical analysis of customer loyalty issues of ISP markets including our own survey in the Hungarian ISP market. Based on the empirical results, we propose a realistic user loyalty model, the price difference dependent loyalty model. Next, we apply the loyalty model in game-theoretical framework where optimal Internet access pricing strategies are expressed. Our game-theoretic framework includes both short-term and long-term interaction cases (single-shot and repeated games, respectively) and is capable of dealing with uncertain as well as dynamic scenarios (Bayesian and Stackelberg games, respectively). Finally, we present the impacts of user loyalty on the prices and profits of ISPs in different scenarios based on simulation results.