Chapter 8Usage-Based Pricing Differentiation for Communication Networks: Incomplete Information and Limited Pricing Choices*

SHUQIN LI and JIANWEI HUANG

8.1 Introduction

Pricing is important for the design, operation, and management of communication networks. Pricing has been used with two different meanings in the area of communication networks. One is the “optimization-oriented” pricing for network resource allocation: it is made popular by Kelly's seminal work on network congestion control [2, 3]. For example, the Transmission Control Protocol (TCP) has been successfully reverse engineered as a congestion-pricing-based solution to a network optimization problem [4, 5]. A more general framework of network utility maximization (NUM) was subsequently developed to forward-engineer many new network protocols (see a recent survey in Reference [6]). In various NUM formulations, the “optimization-oriented” prices often represent the Lagrangian multipliers of various resource constraints and are used to coordinate different network entities to achieve the maximum system performance in a distributed manner. The other is the “economics-based” pricing, which is used by a network service provider to various objectives including revenue maximization. The proper design of such a pricing becomes particularly challenging today because of the exponential growth of data volume and applications in both wireline and wireless networks. In this chapter, we focus on studying the “economics-based” ...

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