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2002

Pricing in multiservice loss networks: static pricing, asymptotic optimality, and demand substitution effects

11 years 26 days ago
Pricing in multiservice loss networks: static pricing, asymptotic optimality, and demand substitution effects
We consider a communication network with fixed routing that can accommodate multiple service classes, differing in bandwidth requirements, demand pattern, call duration, and routing. The network charges a fee per call which can depend on the current congestion level, and which affects user's demand. Building on the single-node results of Paschalidis and Tsitsiklis, 2000, we consider both problems of revenue and welfare maximization and show that static pricing is asymptotically optimal in a regime of many, relatively small, users. In particular, the performance of an optimal (dynamic) pricing strategy is closely matched by a suitably chosen class-dependent static price, which does not depend on instantaneous congestion. This result holds even when we incorporate demand substitution effects into the demand model. More specifically, we model the situation where price increases for a class of service might lead users to use another class as an imperfect substitute. For both revenue a...
Ioannis Ch. Paschalidis, Yong Liu
Added 23 Dec 2010
Updated 23 Dec 2010
Type Journal
Year 2002
Where TON
Authors Ioannis Ch. Paschalidis, Yong Liu
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