University of Toronto
The authors study the infinite horizon dynamic pricing problem for an infrastructure cloud provider in the emerging cloud computing paradigm. The cloud provider, such as Amazon, provides computing capacity in the form of virtual instances and charges customers a time-varying price for the period they use the instances. The provider's problem is then to find an optimal pricing policy, in face of stochastic demand arrivals and departures, so that the average expected revenue is maximized in the long run. They adopt a revenue management framework to tackle the problem. Optimality conditions and structural results are obtained for their stochastic formulation, which yield insights on the optimal pricing strategy.