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Optimal pricing in multi server systems

Ashok Krishnan, KS and Singh, C and Maguluri, ST and Parag, P (2022) Optimal pricing in multi server systems. In: Performance Evaluation, 154 .

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Official URL: https://doi.org/10.1016/j.peva.2021.102282


We study optimal service pricing in server farms where customers arrive according to a renewal process and have independent and identical (i.i.d.) exponential service times and i.i.d. valuations of the service. The service provider charges a time varying service fee aiming at maximizing its revenue rate. The customers that find free servers and service fees lesser than their valuation join for the service else they leave without waiting. We consider both finite server and infinite server farms. We solve the optimal pricing problems using the framework of Markov decision problems. We show that the optimal prices depend on the number of free servers. We propose algorithms to compute the optimal prices. We also establish several properties of the optimal prices and the corresponding revenue rates in the case of Poisson customer arrivals. We illustrate all our findings via numerical evaluation. © 2021 Elsevier B.V.

Item Type: Journal Article
Publication: Performance Evaluation
Publisher: Elsevier B.V.
Additional Information: The copyright for this article belongs to Authors
Keywords: Costs; Economics; Sales, Exponentials; Markov Decision Processes; Multi-server system; Multiservers; Optimal pricing; Renewal process; Server farms; Server system; Service pricing; Service time, Markov processes
Department/Centre: Division of Electrical Sciences > Electronic Systems Engineering (Formerly Centre for Electronic Design & Technology)
Division of Electrical Sciences > Electrical Communication Engineering
Date Deposited: 17 Feb 2022 06:39
Last Modified: 17 Feb 2022 06:39
URI: http://eprints.iisc.ac.in/id/eprint/71314

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