Discriminatory Congestion Pricing of Network Services: A Game Theoretic Approach Using Adverse Selection

Abstract

The quality of network services deteriorates as network utilization increases beyond a certain point, i.e., congestion externalities. Many researchers have proposed congestion pricing models which internalize congestion externalities. However, most studies are based on a unit pricing which cannot reflect user’s different congestion sensitivities. The purpose of this paper is to propose a discriminatory congestion pricing model using adverse selection. Our pricing mechanism provides a