Optimal static pricing for a tree network

Felipe Caro () and David Simchi-Levi ()

Annals of Operations Research, 2012, vol. 196, issue 1, 137-152

Abstract: 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. Copyright Springer Science+Business Media, LLC 2012

Keywords: Phone cards; Erlang loss system; Product-form; Reduced load approximation; Fixed-point equation; Stochastic knapsack; Quasiconcavity (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/s10479-012-1115-4 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:196:y:2012:i:1:p:137-152:10.1007/s10479-012-1115-4

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-012-1115-4

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().