Pricing
and Performance Analysis for a System with Differentiated Services and Customer
Choice
Costis Maglaras and Assaf Zeevi,
Proceedings of the 41st Annual Allerton
Conference on Communication, Control, and Computing , Eds. R. Srikant and
G. Voulgaris, 2003
Abstract:
We consider a model of a service system with finite and
shared processing capacity and two service classes. Users arrive at the system
and select either a high-priority service level where the service requests are
processed at a fixed rate, or a low-priority service level where service rate
is subject to degradation when the system is congested. A fixed
price-per-connection is charged for each service level, and the mean delay in
each class is announced to the users upon arrival. The users, in turn, select
the appropriate class of service based on their perceived ``cost,'' comprised
of price and delay-related cost. We demonstrate that the optimal operational
mode of this system is in ``heavy-traffic'' if the demand is elastic, and determine
the asymptotically optimal price per service grade. In particular, the
magnitude of price-premium for high-priority service is seen to be ``small.''
Finally, a somewhat surprising feature of the system is that the fraction of
users that select each service-level is determined by a ``second-order'' analysis that hinges
on underlying diffusion limits.
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