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Bandwidth-based Nonlinear Pricing on a Shared Link  

Cho, Moon-Kyo (한국정보통신대학교 IT경영학부)
Park, Myeong-Cheol (한국정보통신대학교 IT경영학부)
Choi, Mun-Kee (한국정보통신대학교 IT경영학부)
Publication Information
The Journal of Korean Institute of Communications and Information Sciences / v.32, no.11B, 2007 , pp. 709-717 More about this Journal
Abstract
Pricing a network service aims for congestion control of the network as well as economic efficiency. A monopolistic supplier providing users with a network service on a shared link needs a pricing schedule that maximizes revenue under the link's bandwidth constraint and guarantees the bandwidth purchased by the users. In that case, nonlinear pricing is an efficient scheme which meets both requirements. This study reviews how nonlinear pricing can be applied to the network service under the constraint and shows that the nonlinear pricing may result in a fixed unit price of bandwidth as linear pricing when demand characteristics of the users follow a power law. Also, the way how the provider with incomplete information on the demand distribution seeks for the optimal pricing from the degree of the network congestion is introduced and the relationship between the development direction of the Internet and internet pricing is considered based on the results of the study.
Keywords
Nonlinear pricing; Price schedule; Quantity discount; Power law; Congestion;
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