Economic viability of Paris Metro Pricing for digital services
Author(s)
Author(s)
Chau, C.-K.
Wang, Q.
Date Issued
2014
Publisher
Association for Computing Machinery
Journal
ACM Transactions on Internet Technology
Volume
14
Issue
2-3
Abstract
Nowadays digital services, such as cloud computing and network access services, allow dynamic resource allocation and virtual resource isolation. This trend can create a new paradigm of flexible pricing schemes. A simple pricing scheme is to allocate multiple isolated service classes with differentiated prices, namely Paris Metro Pricing (PMP). The benefits of PMP are its simplicity and applicability to a wide variety of general digital services, without considering specific performance guarantees for different service classes. The central issue of our study is whether PMP is economically viable, namely whether it will produce more profit for the service provider and whether it will achieve more social welfare. Prior studies had only considered specific models and arrived at conflicting conclusions. In this article, we identify unifying principles in a general setting and derive general sufficient conditions that can guarantee the viability of PMP. We further apply the results to analyse various examples of digital services.
SFU Affiliated Publication
No
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