IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v45y1999i6p857-869.html
   My bibliography  Save this article

Dynamic Pricing for Network Service: Equilibrium and Stability

Author

Listed:
  • Yasushi Masuda

    (Faculty of Science and Technology, Keio University, Yokohama, 223-8522 Japan)

  • Seungjin Whang

    (Graduate School of Business, Stanford University, Stanford, California 94305-5015)

Abstract

Consider a data communication network owned and operated by a single organization. The network has an infinite number of small users and is managed by a system manager (SM) whose objective is to maximize the net value of the system as a whole. The objective of this paper is to study pricing mechanisms that induce the optimal arrival rates when the SM has no full knowledge of the demand in advance. We investigate the system behavior under three alternative dynamic pricing rules and users' expectations models, and characterize the equilibrium and its stability conditions.

Suggested Citation

  • Yasushi Masuda & Seungjin Whang, 1999. "Dynamic Pricing for Network Service: Equilibrium and Stability," Management Science, INFORMS, vol. 45(6), pages 857-869, June.
    • Handle: RePEc:inm:ormnsc:v:45:y:1999:i:6:p:857-869
    DOI: 10.1287/mnsc.45.6.857
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.45.6.857
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.45.6.857?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Fudenberg Drew & Kreps David M., 1993. "Learning Mixed Equilibria," Games and Economic Behavior, Elsevier, vol. 5(3), pages 320-367, July.
    2. Mackie-Mason, J.K. & Varian, H.R., 1993. "Pricing the Internet," Memorandum 1993_020, Oslo University, Department of Economics.
    3. Mordecai Ezekiel, 1938. "The Cobweb Theorem," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 52(2), pages 255-280.
    4. James R. Jackson, 1957. "Networks of Waiting Lines," Operations Research, INFORMS, vol. 5(4), pages 518-521, August.
    5. Shaler Stidham, 1992. "Pricing and Capacity Decisions for a Service Facility: Stability and Multiple Local Optima," Management Science, INFORMS, vol. 38(8), pages 1121-1139, August.
    6. Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
    7. Marc Nerlove, 1958. "Adaptive Expectations and Cobweb Phenomena," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(2), pages 227-240.
    8. Fudenberg, Drew & Kreps, David M., 1995. "Learning in extensive-form games I. Self-confirming equilibria," Games and Economic Behavior, Elsevier, vol. 8(1), pages 20-55.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Philipp Afèche & Haim Mendelson, 2004. "Pricing and Priority Auctions in Queueing Systems with a Generalized Delay Cost Structure," Management Science, INFORMS, vol. 50(7), pages 869-882, July.
    2. Wenjie Wang & Lei Xie, 2022. "Optimal pricing of crowdsourcing logistics services with social delivery capacity," Journal of Combinatorial Optimization, Springer, vol. 43(5), pages 1447-1469, July.
    3. Hashimoto, Kaito & Matsubayashi, Nobuo, 2014. "A note on dynamic monopoly pricing under consumption externalities," Economics Letters, Elsevier, vol. 124(1), pages 1-8.
    4. Bodas, Tejas & Manjunath, D., 2019. "Revenue maximization in service systems with heterogeneous customers," European Journal of Operational Research, Elsevier, vol. 278(2), pages 686-698.
    5. Philipp Afèche & Barış Ata, 2013. "Bayesian Dynamic Pricing in Queueing Systems with Unknown Delay Cost Characteristics," Manufacturing & Service Operations Management, INFORMS, vol. 15(2), pages 292-304, May.
    6. Apostolos Burnetas, 2013. "Customer equilibrium and optimal strategies in Markovian queues in series," Annals of Operations Research, Springer, vol. 208(1), pages 515-529, September.
    7. Zhongju Zhang & Debabrata Dey & Yong Tan, 2007. "Pricing Communication Services with Delay Guarantee," INFORMS Journal on Computing, INFORMS, vol. 19(2), pages 248-260, May.
    8. Baric{s} Ata & Shiri Shneorson, 2006. "Dynamic Control of an M/M/1 Service System with Adjustable Arrival and Service Rates," Management Science, INFORMS, vol. 52(11), pages 1778-1791, November.
    9. Vernon N. Hsu & Susan H. Xu & Boris Jukic, 2009. "Optimal Scheduling and Incentive Compatible Pricing for a Service System with Quality of Service Guarantees," Manufacturing & Service Operations Management, INFORMS, vol. 11(3), pages 375-396, May.
    10. Juthasit Rohitratana & Jorn Altmann, 2012. "Impact of Pricing Schemes on a Market for Software-as-a-Service and Perpetual Software," TEMEP Discussion Papers 201288, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Mar 2012.
    11. Joakim Kalvenes & Neil Keon, 2008. "The Market for Video on Demand," Networks and Spatial Economics, Springer, vol. 8(1), pages 43-59, March.
    12. Yasushi Masuda & Seungjin Whang, 2002. "Capacity Management in Decentralized Networks," Management Science, INFORMS, vol. 48(12), pages 1628-1634, December.
    13. Schauf, Andrew & Oh, Poong, 2021. "Myopic reallocation of extraction improves collective outcomes in networked common-pool resource games," SocArXiv w2cxp, Center for Open Science.
    14. Yezekael Hayel & Bruno Tuffin, 2006. "An Optimal Congestion and Cost-sharing Pricing Scheme for Multiclass Services," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 64(3), pages 445-465, December.
    15. Jan A. Van Mieghem, 2000. "Price and Service Discrimination in Queuing Systems: Incentive Compatibility of Gc\mu Scheduling," Management Science, INFORMS, vol. 46(9), pages 1249-1267, September.
    16. Gardner, Everette Jr., 2006. "Exponential smoothing: The state of the art--Part II," International Journal of Forecasting, Elsevier, vol. 22(4), pages 637-666.
    17. Edward Anderson & Frank Kelly & Richard Steinberg, 2006. "A Contract and Balancing Mechanism for Sharing Capacity in a Communication Network," Management Science, INFORMS, vol. 52(1), pages 39-53, January.
    18. Neil Keon & G. “Anand” Anandalingam, 2005. "A New Pricing Model for Competitive Telecommunications Services Using Congestion Discounts," INFORMS Journal on Computing, INFORMS, vol. 17(2), pages 248-262, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sobel, Joel, 2000. "Economists' Models of Learning," Journal of Economic Theory, Elsevier, vol. 94(2), pages 241-261, October.
    2. Christoph March, 2011. "Adaptive social learning," Working Papers halshs-00572528, HAL.
    3. Fausto, Cavalli, 2016. "A cobweb model with alternating demand and supply functions," Working Papers 325, University of Milano-Bicocca, Department of Economics, revised 07 Feb 2016.
    4. Hopkins, Ed, 1999. "Learning, Matching, and Aggregation," Games and Economic Behavior, Elsevier, vol. 26(1), pages 79-110, January.
    5. Aadland, David, 2004. "Cattle cycles, heterogeneous expectations and the age distribution of capital," Journal of Economic Dynamics and Control, Elsevier, vol. 28(10), pages 1977-2002, September.
    6. Cees Diks & Cars Hommes & Valentyn Panchenko & Roy Weide, 2008. "E&F Chaos: A User Friendly Software Package for Nonlinear Economic Dynamics," Computational Economics, Springer;Society for Computational Economics, vol. 32(1), pages 221-244, September.
    7. Jean-Michel Grandmont, 1998. "Expectations Formation and Stability of Large Socioeconomic Systems," Econometrica, Econometric Society, vol. 66(4), pages 741-782, July.
    8. Femenia, Fabienne, 2010. "Impacts of Stockholding Behaviour on Agricultural Market Volatility: A Dynamic Computable General Equilibrium Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
    9. Ellison, Glenn, 1997. "Learning from Personal Experience: One Rational Guy and the Justification of Myopia," Games and Economic Behavior, Elsevier, vol. 19(2), pages 180-210, May.
    10. Hommes, Cars & Lux, Thomas, 2013. "Individual Expectations And Aggregate Behavior In Learning-To-Forecast Experiments," Macroeconomic Dynamics, Cambridge University Press, vol. 17(2), pages 373-401, March.
    11. Tuinstra, Jan & Wegener, Michael & Westerhoff, Frank, 2014. "Positive welfare effects of trade barriers in a dynamic partial equilibrium model," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 246-264.
    12. Sophie Mitra & Jean‐Marc Boussard, 2012. "A simple model of endogenous agricultural commodity price fluctuations with storage," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 1-15, January.
    13. Sonnemans, Joep & Hommes, Cars & Tuinstra, Jan & van de Velden, Henk, 2004. "The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 453-481, August.
    14. Heemeijer, Peter & Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan, 2009. "Price stability and volatility in markets with positive and negative expectations feedback: An experimental investigation," Journal of Economic Dynamics and Control, Elsevier, vol. 33(5), pages 1052-1072, May.
    15. Arango, Santiago & Larsen, Erik, 2011. "Cycles in deregulated electricity markets: Empirical evidence from two decades," Energy Policy, Elsevier, vol. 39(5), pages 2457-2466, May.
    16. Qian Liu & Garrett van Ryzin, 2011. "Strategic Capacity Rationing when Customers Learn," Manufacturing & Service Operations Management, INFORMS, vol. 13(1), pages 89-107, September.
    17. Battigalli, Pierpaolo & Panebianco, Fabrizio & Pin, Paolo, 2023. "Learning and selfconfirming equilibria in network games," Journal of Economic Theory, Elsevier, vol. 212(C).
    18. Langley, Suchada Vichitakul, 1982. "The formation of price expectations: a case study of the soybean market," ISU General Staff Papers 198201010800009358, Iowa State University, Department of Economics.
    19. Friedman, Eric J., 2002. "Strategic properties of heterogeneous serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 44(2), pages 145-154, November.
    20. Ewerhart, Christian & Valkanova, Kremena, 2020. "Fictitious play in networks," Games and Economic Behavior, Elsevier, vol. 123(C), pages 182-206.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:45:y:1999:i:6:p:857-869. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.