Incentive pricing in multi-class communication networks

Abstract

We consider a communication network that offers multi-class services to multiple types of traffic. Users choose service classes so as to optimize their own performance. The network associates with each traffic type a nominal service class. Optimal prices should provide incentives for the users to assign each traffic type to its nominal service class. We establish necessary and sufficient conditions for the existence of optimal prices and provide an algorithm for their computation. We indicate that optimal prices can tolerate fluctuations in the various parameters. We then devise a distributed algorithm, with which the network can compute optimal prices even when it does not have sufficient knowledge on the traffic characteristics. Next, we consider an extended model which explicitly includes congestion effects. A key factor which emerges here is the amount of traffic at the disposal of each user. We consider the typical cases of individual, social and type optimization, for which we generalize our results.