Abstract
Nowadays digital services, such as cloud computing and network access services, allow dynamic resource allocation and virtual resource isolation. This trend can create a new paradigm of flexible pricing schemes. A simple pricing scheme is to allocate multiple isolated service classes with differentiated prices, namely Paris Metro Pricing (PMP). The benefits of PMP are its simplicity and applicability to a wide variety of general digital services, without considering specific performance guarantees for different service classes. The central issue of our study is whether PMP is economically viable, namely whether it will produce more profit for the service provider and whether it will achieve more social welfare. Prior studies had only considered specific models and arrived at conflicting conclusions. In this article, we identify unifying principles in a general setting and derive general sufficient conditions that can guarantee the viability of PMP. We further apply the results to analyze various examples of digital services.
Supplemental Material
Available for Download
Supplemental movie, appendix, image and software files for, Economic Viability of Paris Metro Pricing for Digital Services
- Parkash Chander and Luc Leruth. 1989. The optimal product mix for a monopolist in the presence of congestion effects. Int. J. Industr. Organiz. 7, 4, 437--449.Google Scholar
Cross Ref
- Andre de Palma and Luc Leruth. 1989. Congestion and game in capacity: A duopoly analysis in the presence of network externalities. Annales d'Economie et de Statistique 15--16, 389--407.Google Scholar
- Richard Gibbens, Robin Mason, and Richard Steinberg. 2000. Internet service classes under competition. IEEE J. Select. Areas Comm. 18, 2, 2490--2498. Google Scholar
Digital Library
- Ori Haimanko and Richard Steinberg. 2000. Price Symmetry in a Duopoly with Congestion. Judge Institute of Management Studies.Google Scholar
- Ravi Jain, Tracy Mullen, and Robert Hausman. 2001. Analysis of paris metro pricing strategy for qos with a single service provider. In Proceedings of the 9th IEEE/IFIP International Workshop on Quality of Service (IWQoS'01). 495--500. Google Scholar
Digital Library
- Andrew Odlyzko. 1999. Paris metro pricing for the internet. In Proceedings of the ACM Conference on Electronic Commerce (EC'99). 140--147. Google Scholar
Digital Library
- Andrew Odlyzko, Bill St. Arnaud, Erik Stallman, and Michael Weinberg. 2012. Know your limits: Considering the role of data caps and usage based billing in internet access service. https://www.publicknowledge. org/files/UBP%20paper%20FINAL.pdf.Google Scholar
- Shaolei Ren, Jaeok Park, and Mihaela van der Schaar. 2011. User subscription dynamics and revenue maximization in communications markets. In Proceedings of the IEEE Conference on Computer Communications (INFOCOM'11). 2696--2704.Google Scholar
- Kenneth F. Riley, Michael P. Hobson, and Stephen J. Bence. 2006. Mathematical Methods for Physics and Engineering. Cambridge University Press.Google Scholar
- David Ros and Bruno Tuffin. 2004. A mathematical model of the paris metro pricing scheme for charging packet networks. Comput. Netw. 46, 1, 73--85. Google Scholar
Digital Library
- Hiroaki Sakurai, Shojij Kasahara, and Naotoshi Adachi. 2003. Internet pricing and user opt-out strategy under two isps competition. In Proceedings of the International Network Optimization Conference (INOC'03). 495--500.Google Scholar
- Soumya Sen, Carlee Joe-Wong, Sangtae Ha, and Mung Chiang. 2012. Incentivizing time-shifting of data: A survey of time-dependent pricing for internet access. IEEE Comm. Mag. 11, 50, 91--99.Google Scholar
Cross Ref
- Srinivas Shakkottai, Rayadurgam Srikant, Asuman Ozdaglar, and Daron Accemoglu. 2007. The price of simplicity. IEEE J. Select. Areas Comm. 26, 7, 1269--1276. Google Scholar
Digital Library
Index Terms
Economic Viability of Paris Metro Pricing for Digital Services
Recommendations
Contingent Pricing to Reduce Price Risks
The price for a product may be set too low, causing the seller to leave money on the table, or too high, driving away potential buyers. Contingent pricing can be useful in mitigating these problems. In contingent pricing arrangements, price is ...
An analysis on price matching policy
ICEC '06: Proceedings of the 8th international conference on Electronic commerce: The new e-commerce: innovations for conquering current barriers, obstacles and limitations to conducting successful business on the internetPrice matching policies have been widely adopted in retailing and other industrial markets. The flourishing online channels have made price comparison and matching much easier. Previous research on price matching policy focuses on how this policy ...
Envy-Free Pricing in Large Markets: Approximating Revenue and Welfare
We study the classic setting of envy-free pricing, in which a single seller chooses prices for its many items, with the goal of maximizing revenue once the items are allocated. Despite the large body of work addressing such settings, most versions of ...






Comments