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A differentiated service scheme to optimize website revenues

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  • J Ou

    (National University of Singapore)

  • M Parlar

    (McMaster University, Hamilton)

  • M Sharafali

    (University of Melbourne, Parkville)

Abstract

We consider a website host server with web quality of service (QoS) capabilities to offer differentiated services. A quantitative modelling framework is set up to analyse the economic benefits of differentiated services and to build optimization models for managing the website host's connection bandwidth to the Internet (which is assumed to be the bottleneck factor determining the QoS). Three models are formulated corresponding to three operational scenarios to provide differentiated services. The first is for the marketing manager to classify visit requests as premium or basic when the information technology (IT) manager has already reserved bandwidths for the two classes, and the second is for the IT manager to allocate the total available bandwidth to each class when the marketing manager has already designated which visit requests are premium and which are basic. The third is for the joint optimization of request classification and bandwidth allocation when centralized coordination is possible. Analytic results are obtained for a special case that corresponds to very impatient customers requesting large amounts of data. Qualitative insights gained and numerical results obtained strongly support the implementation of differentiated services. More interestingly, the decentralized models that use simple and rough-cut rules yield solutions almost as good as the joint optimization model.

Suggested Citation

  • J Ou & M Parlar & M Sharafali, 2006. "A differentiated service scheme to optimize website revenues," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(11), pages 1323-1340, November.
    • Handle: RePEc:pal:jorsoc:v:57:y:2006:i:11:d:10.1057_palgrave.jors.2602100
    DOI: 10.1057/palgrave.jors.2602100
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    References listed on IDEAS

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    Cited by:

    1. Chia-Wei Kuo & Kwei-Long Huang & Chao-Lung Yang, 2017. "Optimal contract design for cloud computing service with resource service guarantee," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(9), pages 1030-1044, September.
    2. 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.
    3. Koutras, V.P. & Platis, A.N. & Gravvanis, G.A., 2009. "Optimal server resource reservation policies for priority classes of users under cyclic non-homogeneous markov modeling," European Journal of Operational Research, Elsevier, vol. 198(2), pages 545-556, October.

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