Abstract
Consider a web service with different quality of service levels where users may purchase their required web service through a reservation system. The service provider adjusts prices of web service classes over a prespecified time horizon to manage demand and maximize profit. Users may cancel their services as long as they pay a penalty. One of the important challenges for service providers is capacity limitation of the resources employed in offering the web service. Thus, taking this important proposition into account makes pricing strategies considered by the provider has more credit. Another important factor in determining pricing strategies discussed in the present paper is the market influence which can increase or decrease the price that the provider offers. This paper develops a continuous time optimal control model for identifying pricing strategies for the web service classes. We study the optimality condition of the considered model based on maximum principal and propose an algorithm to obtain the optimal pricing policy. Moreover, we perform numerical analyses to evaluate the effect of some parameters on control and state variables and objective function. In addition, we compare the proposed algorithm with genetic algorithm (GA) and simulated annealing (SA) available in Matlab.
Highlights
In recent years, web services have achieved popularity as an effective and efficient technology for developing and incorporating web applications
Revenue, and 77% and 120% for the profit gained. According to this table, the ratio of the profit to the total revenue for Examples 1 to 3 is, respectively, equal to 31%, 45%, and 50% which indicates that accretion of the demand results in considerable accretion of the profit
We have studied a web service-pricing problem with limited resources constraint over a definite time horizon
Summary
Web services have achieved popularity as an effective and efficient technology for developing and incorporating web applications. We develop and study a nonlinear continuous time optimal control model for the web service pricing problem in which users buy their required web service over a reservation system and utilize it in the future. The main part of the proposed model is that required resources are shared among all web service classes Another important factor in determining pricing strategies which is discussed in the present paper is the market influence which can increase or decrease the price that the provider offers. Mesak et al employed methods of the optimal control theory and calculus of variations to solve a problem in which a service provider wants to maximize the present value of revenue/profit over a planned horizon in continuous time They studied the role of the threat of competitive entry and discount rate in describing the optimal allocation strategy of capacity over time. The proposed algorithm is compared with GA and SA
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