Flexible-price Model Research Articles

Randomized Mechanisms for Selling Reserved Instances in Cloud

Selling reserved instances (or virtual machines) is a basic service in cloud computing. In this paper, we consider a more flexible pricing model for instance reservation, in which a customer can propose the time length and number of resources of her request, while in today's industry, customers can only choose from several predefined reservation packages. Under this model, we design randomized mechanisms for customers coming online to optimize social welfare and providers' revenue. We first consider a simple case, where the requests from the customers do not vary too much in terms of both length and value density. We design a randomized mechanism that achieves a competitive ratio 1/42 for both social welfare and revenue, which is a improvement as there is usually no revenue guarantee in previous works such as (Azar et al. 2015; Wang et al. 2015. This ratio can be improved up to 1/11 when we impose a realistic constraint on the maximum number of resources used by each request. On the hardness side, we show an upper bound 1/3 on competitive ratio for any randomized mechanism.We then extend our mechanism to the general case and achieve a competitive ratio 1/42⌈log k⌉ log T for both social welfare and revenue, where T is the ratio of the maximum request length to the minimum request length and k is the ratio of the maximum request value density to the minimum request value density. This result outperforms the previous upper bound 1/CkT for deterministic mechanisms (Wang et al. 2015). We also prove an upper bound 2/log 8kT for any randomized mechanism. All the mechanisms we provide are in a greedy style. They are truthful and easy to be integrated into practical cloud systems.

An Invocation Cost Optimization Method for Web Services in Cloud Environment

The advent of cloud computing technology has enabled users to invoke various web services in a “pay-as-you-go” manner. However, due to the flexible pricing model of web services in cloud environment, a cloud user’ service invocation cost may be influenced by many factors (e.g., service invocation time), which brings a great challenge for cloud users’ cost-effective web service invocation. In view of this challenge, in this paper, we first investigate the multiple factors that influence the invocation cost of a cloud service, for example, user’s job size, service invocation time, and service quality level; and afterwards, a novel Cloud Service Cost Optimization Method named CS-COM is put forward, by considering the above multiple impact factors. Finally, a set of experiments are designed, deployed, and tested to validate the feasibility of our proposal in terms of cost optimization. The experiment results show that our proposed CS-COM method outperforms other related methods.

Optimal investment in multidimensional Markov-modulated affine models

In a multidimensional affine framework we consider a portfolio optimization problem with finite horizon, where an investor aims to maximize the expected utility of her terminal wealth. We state a very flexible asset price model that incorporates several risk factors modeled both by diffusion processes and by a Markov chain. Exploiting the affine structure of the model we solve the corresponding Hamilton–Jacobi–Bellman equations explicitly up to an expectation only over the Markov chain or equivalently up to a system of simple ODEs. The relevance of the presented model is illustrated on two examples including a stochastic short rate model with trading in the bond and the stock market, and a multidimensional stochastic volatility and stochastic correlation model. Precise verification results for both examples are provided. Economic interpretations of the models and results complement the theoretical analysis.

Current Account Adjustment in the Eurozone: Lessons From a Flexible Price Model

AbstractThis paper discusses the desired size of the internal devaluation in the Eurozone for a scenario of current account adjustment induced by shifts in relative demand. Based on Obstfeld and Rogoff, I develop a four‐region model of the world economy consisting of the Eurozone‐core, Eurozone‐periphery, United States and Asia. In contrast to most of the existing literature, this model structure enables studying the impact of global current account adjustment on the rebalancing process in the Eurozone. In addition, the model allows for movements of factors of production between tradable and non‐tradable sectors. The results point to the important impact of sectoral reallocation and increases in Asian demand on the size of the internal devaluation as well as on the implied length of the adjustment period.

The failure of the monetary model of exchange rate determination

In this article, we test three popular versions of the monetary model (flexible price, forward-looking and real interest differential models) for the OECD member countries by applying Johansen cointegration technique. Based on country-by-country analysis, we conclude that monetary models do not provide the expected results. We reveal several shortcomings of the models and examine the building blocks of the fundamental version. Although researchers always blame the deviations from purchasing power parity as the reason for the failure of the monetary model, our analysis indicates that invalidity of Keynesian money demand function is also responsible for unfavourable results.

Flexible Pricing Models for Cloud Computing Based on Group Decision Making Under Consensus

Today, cloud computing is transforming the consumption of IT/ITeS. Numerous vendors are offering services where computing, storage and application resources, can be dynamically provisioned on a pay per use basis, purely based on the user’s need. However, the demands and requirements of different users vary significantly. In order to maximize the revenue, a flexible pricing approach is required, which can address these diverse requirements systematically. These systemic approaches need to estimate the potential value of such services to specific users for a specific context. The tradeoffs from potential value drivers also need to be accounted for while prioritizing the value drivers. In these lines, the current study proposes a flexible pricing approach for Infrastructure as a Service (IaaS), one of the important delivery models, based on its perceived value to multiple key stake-holders. The proposed approach prioritizes and aggregates the key features of IaaS for the migration to cloud, from multiple key users’ perspective by integrating fuzzy set theory and analytic hierarchy process for group decision making under consensus. Subsequently, the prioritization is mapped with a utility function to estimate the trade-offs from each value driver. The performance of the proposed approach has also been compared with that of another flexible pricing model through a case study.

Discussion

Discussion

Flexible Pricing Models for Cloud Services

Cloud Computing's service models IaaS and PaaS have a number of proprietary pricing models as the services has been commoditized to some extent. The SaaS so far has been known with a flat price within the usage time. But pricing models need to be more flexible to prevent customers from thinking that paying same price for a service over a period is no more cost effective, in spite of the level of utilization of the service. For Cloud Computing this has to be taken into account. Africans are not used to fixed price models in their business transactions. In order to expand the acceptability of Cloud Computing to African a means of disputing prices is necessary. This study proposes cloud utility price models to give the Cloud customer the luxury of different usage style and determine a customer specific, individual, most suitable price model. It gives the customer the opportunity to choose a price model for the predicted usage and work within the budget. The proposed cloud utility price models presented using use cases.

Variance Components, Term Structures of Variance Risk Premia, and Expected Asset Returns

This paper examines the properties of the variance risk premium (VRP). We propose a flexible asset pricing model that captures co-jumps in prices and volatility, and self-exciting jump clustering. We estimate the model on equity returns and variance swap rates at different horizons. The total VRP is negative and has a downward-sloping term structure, while its jump component displays an upward-sloping term structure. The abrupt and persistent response of the short-term jump VRP to extreme events makes this specific premium a proxy for investors' fear of a market crash. Furthermore, the use of the VRP level and slope, and of its components, helps improve the short-run predictability of equity excess returns.

Bounded interest rate feedback rules in continuous-time

This paper analyzes the dynamic consequences of interest rate feedback rules in a flexible-price model where money enters the utility function. Two alternative rules are considered based on past or predicted inflation rates. The main feature is to consider inflation rates that are selected over a bounded time horizon. We prove that if the Central Bank's forecast horizon is not too long, an active and forward-looking monetary policy is not destabilizing: the equilibrium trajectory is unique and monotonic. This is an advantage with respect to active and backward-looking policies that are shown to lead to a unique but fluctuating dynamic.

Flexible prices, labor market frictions and the response of employment to technology shocks

Recent empirical evidence establishes that a positive technology shock leads to a decline in labor inputs. Standard RBC models fails to replicate this stylized fact, while recent papers show that augmenting the model with implementation lags, or habit formation, or shock persistence in growth rates among others accounts for this fact. In this paper, we show that a standard flexible price model with labor market frictions that allows hiring costs to depend on technology shocks may also lead to the same negative impact on labor inputs. Labor market frictions are therefore able to account for the fall in labor inputs. However, the elasticity of hiring costs to technology shocks is large, suggesting that additional extensions to the model are needed.

Flexible Prices, Labor Market Frictions, and the Response of Employment to Technology Shocks

Abstract Recent empirical evidence establishes that a positive technology shock leads to a decline in labor inputs. Standard RBC models fails to replicate this stylized fact, while recent papers show that augmenting the model with implementation lags, or habit formation, or shock persistence in growth rates among others accounts for this fact. In this paper, we show that a standard flexible price model with labor market frictions that allows hiring costs to depend on technology shocks may also lead to the same negative impact on labor inputs. Labor market frictions are therefore able to account for the fall in labor inputs. However, the elasticity of hiring costs to technology shocks is large, suggesting that additional extensions to the model are needed.

Government spending under non-separability: a theoretical analysis

We derive analytic implicit form conditions for the qualitative analysis of government spending multipliers and the optimal level of government spending in presence of non-separability between private and public components of aggregate demand. Using the simplest neo-classical flexible price model with no capital accumulation, we show that Edgeworth dependence is not a suitable condition to automatically assess the signs of the consumption and output multipliers, for which a more complex analysis must be carried out. We propose a detailed investigation of the form and the characteristics of the involved utility functions, which are crucial to such evaluation. We also show that if Edgeworth complementarity is strong enough, a public spending stimulus can raise at the same time private consumption and real activity. In order to reconcile our general framework with existing literature, we discuss recent examples of non-separable functional forms from the standpoint of our results, and argue that their consistency relies on specific assumptions about steady-state points.

Heavy fuel oil analysis at Iraq's Bayji refinery

This case study develops a dynamic model to analyse Heavy Fuel Oil (HFO) production and distribution at Iraq's largest oil refinery. It studies the impact of instituting a more flexible export pricing model for HFO removal, which constrains production due to physical storage limitations on refined fuel production and revenue generation. The production model utilizes system dynamics concepts and incorporates six independent, uncorrelated inputs (market prices, power outages, HFO produced, HFO removed via the power plant, local and export trucking) to effectively simulate historical trends. An export pricing model was then added to optimize the production model. Various sensitivities regarding the Iraq HFO export market to price fluctuations, time lag for prices changes to take effect, and production increases resultant of HFO storage becoming a less significant constraint were explored. The analysis reveals significant increased revenue potential, ranging from $50 million USD to $1 billion USD annually, by implementing a pricing system that adjusts HFO export prices based on HFO storage levels with minimal downside risk.

An Incentive Mechanism Using Game Theory for Wireless Mesh Networks

Wireless mesh networks (WMNs) have attracted much attention in recent years. The main problems in WMNs are the unfairness in bandwidth sharing and potential selfish behavior. In this paper, an incentive-based pricing model is designed which follows the concepts of mechanism design in game theory to encourage nodes to relay packets for other nodes and therefore achieve fairness. In the pricing model, we consider the packet transmitting amounts, idle conditions and the special need of border nodes in the margin area. The incentive is the main feature of the model. We also discuss the model using mathematical analysis from various perspectives. The analysis shows that this model is highly effective in eliminating unfairness in the multi-hop transmission topology. This is achieved by allowing border mesh routers to receive a fair profit. This flexible pricing model is capable of encouraging packet forwarding. With the issue of unfairness resolved, WMNs can be expected to have a broader range of applications.

MONEY, CAPITAL, AND EXCHANGE RATE FLUCTUATIONS*

We explore how the informational frictions underlying monetary exchange affect international exchange rate dynamics. Our perfectly flexible price model is capable of producing endogenously rigid international relative prices in response to technology and monetary shocks. The model is capable of accounting for the empirical regularities that the real and nominal exchange rates are more volatile than U.S. output, and that the two are positively and perfectly correlated. The model is also consistent with other standard real business cycle facts for the United States.

Comment

Comment

Valuation of credit contingent interest rate swap

The aim of this paper is to establish a tractable and flexible pricing model for Credit Contingent Interest Rate Swap (CCIRS), which is sensitive to interest rate and credit risk. Intensity-based approach is adopted to construct models for risk-free interest rate and default intensity. By using multi-factor Affine Jump Diffusion (AJD) process, a semi-close solution to the price of single-name CCIRS is derived. Further more, we put the counterparty risk into our pricing framework to compute the Credit Value Adjustment (CVA). Finally, numerical results and analysis have also been carried on.

Why professional athletic organizations face elevated levels of resistance to pricing increases versus other entertainment and leisure organizations

Professional athletic organizations face a myriad of challenges in their attempts to maximize revenues while minimizing consumer resistance. In addition to high levels of customer awareness, greater pricing transparency and less flexible pricing models, organizations face greater scrutiny based on the perceived wealth of their owners and athletes, especially compared with non-profit collegiate competition competing in the same sports. Not all root causes of this consumer resistance are created equally. Some organizations may suffer tremendously from one specific root cause, the same cause that may have a negligible effect on other organizations in the same league or even other teams in the same city. While teams may take preventive and corrective actions to lower levels of resistance over time, it is unlikely that the key risk factors for elevated consumer resistance will change in the near future.

Gold rush fever in business cycles

A flexible price model of the business cycle is proposed, in which fluctuations are driven primarily by inefficient movements in investment around a stochastic trend. A boom in the model arises when investors rush to exploit new market opportunities even though the resulting investments simply crowd out the value of previous investments. A metaphor for such profit driven fluctuations are gold rushes, as they are periods of economic boom associated with expenditures aimed at securing claims near new found veins of gold. An attractive feature of the model is its capacity to provide a simple structural interpretation to the properties of a standard consumption and output Vector Autoregression.