Dynamic Pricing of Preemptive Service for Elastic Demand
The authors consider a service provider that accommodates two classes of users: Primary Users (PUs) and Secondary Users (SUs). SU demand is elastic to price whereas PU demand is inelastic. When a PU arrives to the system and finds all channels busy, it preempts an SU unless there are no SUs in the system. Call durations are exponentially distributed and their means are identical. They study the optimal pricing policy of SUs by using dynamic programming to maximize the total expected discounted profit over finite and infinite horizons, and the average profit.