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Open Access Publications from the University of California

Static Pricing for a Network Service Provider


This article studies the static pricing problem of a network service provider who has a fixed capacity and faces different types of customers (classes). We consider a single-bandwidth tree network, meaning that each class can have its own capacity constraint but it is assumed that all classes have the same resource requirements. The provider must decide a static price for each class. The customer types are characterized by their arrival process, with a price-dependant arrival rate, and the random time they remain in the system. The goal is to characterize the optimal static prices in order to maximize the provider's revenue. We report new structural findings and insights, illustrative numerical examples, and alternative proofs for some known results. This problem was originally thought for a company that sells phone cards and needs to set the price-per-minute for each destination.

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