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Optimal Measurement-based Pricing for an M/M/1 Queue

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  • Yezekael Hayel
  • Mohamed Ouarraou
  • Bruno Tuffin

Abstract

In this paper, we consider a system modelled as an M/M/1 queue. Jobs corresponding to different classes are sent to the queue and are characterized by a delay cost per unit of time and a demand function. Our goal is to design an optimal pricing scheme for the queue, where the total charge depends on both the mean delay at the queue and arrival rate of each customer. We also assume that those two values have to be (statistically) measured, introducing errors on the total charge that might avert jobs from using the system, and then decrease demand. This model can be applied in telecommunication networks, where pricing can be used to control congestion, and the network can be characterized by a single bottleneck queue; the throughput of each class would be determined through passive measurements while the delay would be determined through active measurements. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Yezekael Hayel & Mohamed Ouarraou & Bruno Tuffin, 2007. "Optimal Measurement-based Pricing for an M/M/1 Queue," Networks and Spatial Economics, Springer, vol. 7(2), pages 177-195, June.
    • Handle: RePEc:kap:netspa:v:7:y:2007:i:2:p:177-195
    DOI: 10.1007/s11067-006-9001-8
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    References listed on IDEAS

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    1. Gupta, Alok & Jukic, Boris & Li, Mingzhi & Stahl, Dale O. & Whinston, Andrew B., 2001. "Estimating Internet Users' Demand Characteristics," Computational Economics, Springer;Society for Computational Economics, vol. 17(2-3), pages 203-218, June.
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