An Economic Model for Pricing Tiered Network Services

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Executive Summary

The authors consider networks offering tiered services and corresponding price structures, a model that has become prevalent in practice. They develop an economic model for such networks and make contributions in two important areas. First, they formulate the problem of selecting the service tiers and present an approximate yet accurate and efficient solution approach for tackling this nonlinear programming problem. Given the set of (Near-) optimal service tiers, they 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.

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