  Certain services may be provided in a continuous, one-dimensional, ordered
range of different qualities and a customer requiring a service of quality q
can only be offered a quality superior or equal to q. Only a discrete set of
different qualities will be offered, and a service provider will provide the
same service (of fixed quality b) to all customers requesting qualities of
service inferior or equal to b. Assuming all services (of quality b) are priced
identically, a monopolist will choose the qualities of service and the prices
that maximize profit but, under perfect competition, a service provider will
choose the (inferior) quality of service that can be priced at the lowest
price. Assuming significant economies of scale, two fundamentally different
regimes are possible: either a number of different classes of service are
offered (DC regime), or a unique class of service offers an unbounded quality
of service (UC regime). The DC regime appears in one of two sub-regimes: one,
BDC, in which a finite number of classes is offered, the qualities of service
offered are bounded and requests for high-quality services are not met, or UDC
in which an infinite number of classes of service are offered and every request
is met. The types of the demand curve and of the economies of scale, not the
pace of technological change, determine the regime and the class boundaries.
The price structure in the DC regime obeys very general laws.
