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A Contract and Balancing Mechanism for Sharing Capacity in a Communication Network

Author

Listed:
  • Edward Anderson

    (Australian Graduate School of Management, University of New South Wales, Sydney, Australia)

  • Frank Kelly

    (Statistical Laboratory, Centre for Mathematical Sciences, Cambridge CB3 0WB, United Kingdom)

  • Richard Steinberg

    (Judge Business School, University of Cambridge, Cambridge CB2 1AG, United Kingdom)

Abstract

We propose a method for determining how much to charge users of a communication network when they share bandwidth. Our approach can be employed either when a network owner wishes to sell bandwidth for a specified period of time to a number of different users, or when users cooperate to build a network to be shared among themselves. Our proposed contract and balancing mechanism can mediate between rapidly fluctuating prices and the longer time scales over which bandwidth contracts may be traded. An advantage of the process is that it avoids perverse incentives for a capacity provider to increase congestion.

Suggested Citation

  • 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.
    • Handle: RePEc:inm:ormnsc:v:52:y:2006:i:1:p:39-53
    DOI: 10.1287/mnsc.1050.0455
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    References listed on IDEAS

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    1. Sanjeev Dewan & Haim Mendelson, 1990. "User Delay Costs and Internal Pricing for a Service Facility," Management Science, INFORMS, vol. 36(12), pages 1502-1517, December.
    2. Clark, David D, 1996. "Adding service discrimination to the Internet," Telecommunications Policy, Elsevier, vol. 20(3), pages 169-181, April.
    3. Christopher M. Rump & Shaler Stidham, 1998. "Stability and Chaos in Input Pricing for a Service Facility with Adaptive Customer Response to Congestion," Management Science, INFORMS, vol. 44(2), pages 246-261, February.
    4. Yasushi Masuda & Seungjin Whang, 1999. "Dynamic Pricing for Network Service: Equilibrium and Stability," Management Science, INFORMS, vol. 45(6), pages 857-869, June.
    5. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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    Cited by:

    1. Yiting Xing & Ling Li & Zhuming Bi & Marzena Wilamowska‐Korsak & Li Zhang, 2013. "Operations Research (OR) in Service Industries: A Comprehensive Review," Systems Research and Behavioral Science, Wiley Blackwell, vol. 30(3), pages 300-353, May.
    2. Martin Natter & Andreas Mild & Udo Wagner & Alfred Taudes, 2008. "—Planning New Tariffs at tele.ring: The Application and Impact of an Integrated Segmentation, Targeting, and Positioning Tool," Marketing Science, INFORMS, vol. 27(4), pages 600-609, 07-08.
    3. Ayalvadi Ganesh & Koenraad Laevens & Richard Steinberg, 2007. "Congestion Pricing and Noncooperative Games in Communication Networks," Operations Research, INFORMS, vol. 55(3), pages 430-438, June.

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