Tariff
In contrast, in economic theory tariffs are viewed as a primary element in international trade with the function of the tariff being to influence the flow of trade by lowering or raising the price of targeted goods to create what amounts to an artificial competitive advantage. When tariffs are viewed and used in this fashion, they are addressing the country's and the competitors' respective economic healths in terms of maximizing or minimizing revenue flow rather than in terms of the ability to generate and maintain a competitive advantage which is the source of the revenue. As a result, the impact of the tariffs on the economic health of the country are at best minimal but often are counter-productive.
Telecommunications tariff
At a minimum, tariffs imposed must cover the cost of providing the service to the consumer. The consumer may be the final user or an intermediary such as a service provider. If a telecommunications operator cannot recover its costs, it will make a loss and the company will go bankrupt. Tariffs must also be used to cover maintenance, additional research and other indirect costs associated with providing the service. However, telecommunications service providers must be careful not to over-price each service, as prices have a direct influence on demand for that service (see supply and demand). Such an operator must constantly balance the need to provide cheaper rates, especially if there is strong competition, with the cost of maintaining the service at an optimum quality that is acceptable to the customer. If an operator charges too much, it risks alienating its customers, resulting in a loss of traffic and therefore revenue; if they charge too little, they will have insufficient capital to maintain the network's quality of Service. Over time this will result in customer attrition.