As the ability to measure technology resource usage gets easier with increased connectivity, the question whether a technology resource should be priced by the amount of the resource used or by the particular use of the resource has become increasingly important. We examine this issue in the context of pricing of wireless services: should the price be based on the service, e.g., voice, multimedia messages, short messages, or should it be based on the traffic generated? Many consumer advocates oppose discriminatory pricing across services believing that it enriches carriers at the expense of consumers. The opposition to discrimination has grown significantly, and it has even prompted the U.S. Congress to question executives of some of the biggest carriers. With this ongoing debate on discrimination in mind, we compare two pricing regimes here. One regime, namely, service pricing, involves pricing different services differently. The other one, namely, traffic pricing, involves pricing the traffic (i.e., bytes) transmitted. We show why the common wisdom, that discriminatory pricing across services increases profits and harms consumers, may not always hold. We also show that such discrimination can increase social welfare.
Many successful open-source projects have been developed by programmers who were employed by firms but worked on open-source projects on the side because of economic incentives like career improvement benefits. Such side work may be a good thing for the employing firms, too, if they get some strategic value from the open-source software and if the productivity of the programmers on these projects improves through learning-by-doing effects. However, the programmers may work more or less on these projects than what is best for the firms. To manage the programmers' efforts, the firms set appropriate employment policies and incentives. These policies and career concerns then together govern the programmers' effort allocation between the open-source and proprietary projects. We examine this relationship using a variant of the principal/agent model. We derive and characterize optimal employment contracts and show that firms either offer a bonus for only one of the two projects or do not offer any bonuses. However, if attractive alternate employment opportunities are available, they change their strategy and may offer bonuses for both projects simultaneously.