Economic Models for Tiered Network Services

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Title: Economic Models for Tiered Network Services
Author: Lv, Qian
Advisors: Wenye Wang, Committee Member
Rudra Dutta, Committee Member
Khaled Harfoush, Committee Member
George N Rouskas, Committee Chair
Abstract: Tiered network services have been prevalent in current networking industry. The term tiered service means that the network operator only provides a small set of tiers (levels) - which offer progressively higher levels of service - to the customers each of whom will be mapped to one of the given tiers. In this thesis we focus on the economic issues for tiered network service. We first formulate the problem of selecting service tiers from three perspectives: one that considers the users interests only, one that considers only the service provider’s interests, and one that considers both simultaneously. We consider the solution to this problem under two cases: 1) the discrete case, i.e., each user demand is known to the service provider; 2) the stochastic case, i.e., the service provider only knows the probability distribution of the user demands. For both cases, we present accurate and efficient algorithms based on dynamic programming. After finding the set of (near-) optimal service tiers, we then employ game-theoretic techniques to find an optimal price for each service tier that strikes a balance between the conflicting objectives of users and service provider. This work provides a theoretical framework for reasoning about and pricing Internet tiered services, as well as a practical toolset for network providers to develop customized menus of service offerings. We further consider some advanced economic topics in tiered network service. We notice that some network services may tend to be elastic, i.e., the users may value a given service differently and show different willingness to pay for the service. In this thesis, we assume that users are partitioned into some distinct classes. We develop an optimal algorithm to select jointly the set of service tiers and their prices so as to maximize the provider profits. Our research shows that introducing multiple tiers can be an effective market segmentation strategy that may lead to an increase in profits. Another advanced topic in tiered network service is service bundling, which means the network providers combine several services together and sell them as a single package at a lower price than that if the services are sold separately. Based on tools from microeconomics and utility theory, we developed an efficient method to find tiered structures for bundles of network services with the objective of maximizing provider profits under user constraints.
Date: 2010-04-12
Degree: PhD
Discipline: Computer Science

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