An economic model for pricing tiered network services

Abstract

Abstract-We consider networks offering tiered services and corresponding price structures, a model that has become prevalent in practice. We develop an economic model for such networks and make contributions in two important areas. First, we formulate the problem of selecting the service tiers and present an approximate yet accurate and efficient solution approach for tackling this nonlinear programming problem. Given the set of (near-) optimal service tiers, we then employ game-theoretic techniques to find an optimal price for each service tier that strikes a balance between the conflicting objectives of users and service provider. This work provides a theoretical framework for reasoning about and pricing Internet tiered services. Our results also indicate that tiering solutions currently adopted by ISPs do not perform well.

ISP Service Tier Design

“…Corollary 2: If is strictly convex, if the density function of users' willingness-to-pay for web browsing satisfies (7), marginal network cost satisfies (5), and if an ISP seeks to maximize its profit in (4), then the ISP will offer two different tiers if the cost of network capacity . Proof: Equation (8) can be rewritten as (11) We consider three cases depending on the magnitude of . If…”

“…He and Walrand [10] consider Internet service offered at multiple quality levels and prices, and obtain equilibrium results by modeling a game between users maximizing surplus under fixed prices; they also consider revenue maximization for a monopoly ISP. Lv and Rouskas [11], [12] also consider Internet service offered at multiple quality levels and prices, but assume that users choose the highest tier they can afford; they propose an algorithm that attempts to maximize a monopoly ISP's profit under a fixed cost per user by controlling quality levels and prices. These papers model user willingness-to-pay solely as a function of an aggregated service quality (e.g.…”

Proximity-Aware Cloud Selection and Virtual Machine Allocation in IaaS Cloud Platforms

“…We would also consider to introduce tiered service model [26,25,36] for the cloud provider, which classifies the service into tiers and charge the service tiers at different prices.…”

Saving the environment from the internet: A polynomial mitigation model of reducing Individual Internet Consumption through Internet Pricing and Environmental Awareness

“…In relation to internet pricing, researchers have investigated economic (Bateni, Hajiaghayi, Jafarpour, & Pei, 2011;Lv & Rouskas, 2010) and network congestion (Nevo, Turner, & Williams, 2016;Sen, Joe-Wong, Ha, & Chiang, 2015) specific pricing strategies to maximise profits and to increase resource utilisation which lacks the environmental perspective. Near zero internet prices increase the internet demand exponentially, and more importantly, it creates irresponsible internet practices such as unattended music or video playing, addictive social media usage, and addictive online gaming behaviours.…”