Optimal static pricing for a tree network
We study the static pricing problem for a network service provider in a loss system with a tree structure. In the network, multiple classes share a common inbound link and then have dedicated outbound links. The motivation is from a company that sells phone cards and needs to price calls to differen...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Springer-Verlag
2013
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| Online Access: | http://hdl.handle.net/1721.1/77970 https://orcid.org/0000-0002-4650-1519 |
| _version_ | 1826198206770315264 |
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| author | Caro, Felipe Simchi-Levi, David |
| author2 | Massachusetts Institute of Technology. Department of Civil and Environmental Engineering |
| author_facet | Massachusetts Institute of Technology. Department of Civil and Environmental Engineering Caro, Felipe Simchi-Levi, David |
| author_sort | Caro, Felipe |
| collection | MIT |
| description | We study the static pricing problem for a network service provider in a loss system with a tree structure. In the network, multiple classes share a common inbound link and then have dedicated outbound links. The motivation is from a company that sells phone cards and needs to price calls to different destinations. We characterize the optimal static prices in order to maximize the steady-state revenue. We report new structural findings as well as alternative proofs for some known results. We compare the optimal static prices versus prices that are asymptotically optimal, and through a set of illustrative numerical examples we show that in certain cases the loss in revenue can be significant. Finally, we show that static prices obtained using the reduced load approximation of the blocking probabilities can be easily obtained and have near-optimal performance, which makes them more attractive for applications. |
| first_indexed | 2024-09-23T11:00:59Z |
| format | Article |
| id | mit-1721.1/77970 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:00:59Z |
| publishDate | 2013 |
| publisher | Springer-Verlag |
| record_format | dspace |
| spelling | mit-1721.1/779702022-10-01T00:33:47Z Optimal static pricing for a tree network Caro, Felipe Simchi-Levi, David Massachusetts Institute of Technology. Department of Civil and Environmental Engineering Simchi-Levi, David We study the static pricing problem for a network service provider in a loss system with a tree structure. In the network, multiple classes share a common inbound link and then have dedicated outbound links. The motivation is from a company that sells phone cards and needs to price calls to different destinations. We characterize the optimal static prices in order to maximize the steady-state revenue. We report new structural findings as well as alternative proofs for some known results. We compare the optimal static prices versus prices that are asymptotically optimal, and through a set of illustrative numerical examples we show that in certain cases the loss in revenue can be significant. Finally, we show that static prices obtained using the reduced load approximation of the blocking probabilities can be easily obtained and have near-optimal performance, which makes them more attractive for applications. Massachusetts Institute of Technology. Center for Digital Business United States. Office of Naval Research (Contract N00014-95-1-0232) United States. Office of Naval Research (Contract N00014-01-1-0146) National Science Foundation (U.S.) (Contract DMI-9732795) National Science Foundation (U.S.) (Contract DMI-0085683) National Science Foundation (U.S.) (Contract DMI-0245352) 2013-03-21T18:50:46Z 2013-03-21T18:50:46Z 2012-04 Article http://purl.org/eprint/type/JournalArticle 0254-5330 1572-9338 http://hdl.handle.net/1721.1/77970 Caro, Felipe, and David Simchi-Levi. “Optimal Static Pricing for a Tree Network.” Annals of Operations Research 196.1 (2012): 137–152. https://orcid.org/0000-0002-4650-1519 en_US http://dx.doi.org/10.1007/s10479-012-1115-4 Annals of Operations Research Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf Springer-Verlag SSRN |
| spellingShingle | Caro, Felipe Simchi-Levi, David Optimal static pricing for a tree network |
| title | Optimal static pricing for a tree network |
| title_full | Optimal static pricing for a tree network |
| title_fullStr | Optimal static pricing for a tree network |
| title_full_unstemmed | Optimal static pricing for a tree network |
| title_short | Optimal static pricing for a tree network |
| title_sort | optimal static pricing for a tree network |
| url | http://hdl.handle.net/1721.1/77970 https://orcid.org/0000-0002-4650-1519 |
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