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On Optimal Two-Sided Pricing of Congested Networks

On Optimal Two-Sided Pricing of Congested Networks On Optimal Two-Sided Pricing of Congested Networks XIN WANG, University of Science and Technology of China RICHARD T. B. MA, National University of Singapore YINLONG XU, University of Science and Technology of China Traditionally, Internet Access Providers (APs) only charge end-users for Internet access services; however, to recoup infrastructure costs and increase revenues, some APs have recently adopted two-sided pricing schemes under which both end-users and content providers are charged. Meanwhile, with the rapid growth of traffic, network congestion could seriously degrade user experiences and influence providers' utility. To optimize profit and social welfare, APs and regulators need to design appropriate pricing strategies and regulatory policies that take the effects of network congestion into consideration. In this paper, we model two-sided networks under which users' traffic demands are influenced by exogenous pricing and endogenous congestion parameters and derive the system congestion under an equilibrium. We characterize the structures and sensitivities of profit- and welfare-optimal two-sided pricing schemes and reveal that 1) the elasticity of system throughput plays a crucial role in determining the structures of optimal pricing, 2) the changes of optimal pricing under varying AP's capacity and users' congestion sensitivity are largely driven by the type of http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Proceedings of the ACM on Measurement and Analysis of Computing Systems Association for Computing Machinery

On Optimal Two-Sided Pricing of Congested Networks

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Publisher
Association for Computing Machinery
Copyright
Copyright © 2017 by ACM Inc.
ISSN
2476-1249
DOI
10.1145/3084444
Publisher site
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Abstract

On Optimal Two-Sided Pricing of Congested Networks XIN WANG, University of Science and Technology of China RICHARD T. B. MA, National University of Singapore YINLONG XU, University of Science and Technology of China Traditionally, Internet Access Providers (APs) only charge end-users for Internet access services; however, to recoup infrastructure costs and increase revenues, some APs have recently adopted two-sided pricing schemes under which both end-users and content providers are charged. Meanwhile, with the rapid growth of traffic, network congestion could seriously degrade user experiences and influence providers' utility. To optimize profit and social welfare, APs and regulators need to design appropriate pricing strategies and regulatory policies that take the effects of network congestion into consideration. In this paper, we model two-sided networks under which users' traffic demands are influenced by exogenous pricing and endogenous congestion parameters and derive the system congestion under an equilibrium. We characterize the structures and sensitivities of profit- and welfare-optimal two-sided pricing schemes and reveal that 1) the elasticity of system throughput plays a crucial role in determining the structures of optimal pricing, 2) the changes of optimal pricing under varying AP's capacity and users' congestion sensitivity are largely driven by the type of

Journal

Proceedings of the ACM on Measurement and Analysis of Computing Systems – Association for Computing Machinery

Published: Jun 13, 2017

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