Congestion-dependent pricing for a service provider

Abstract

A service provider who provides users access· to a communication network is constrained in the system by the limited amount of bandwidth that can be offered to users. We will discuss congestion-dependent pricing, a method of pricing connection access to the network that accounts for this bandwidth constraint. Different models for the system are analyzed and simulated. The case of multiple classes of users as well as the case of a probabilistic demand function are analyzed in detail. The dynamic congestion-dependent pricing policy that maximizes performance will be determined using dynamic programming. The steady state revenue generated for the service provider will be used as the measure of system performance. Additionally, approximation and estimation techniques to simplify analysis and implementation of different systems are analyzed.