Modeling Pricing Mechanisms in Packet-Switched Communication Networks

In recent years, several pricing models which address the problem of Internet congestion have been studied. Today, internet users are charged mostly on a flat-fee basis, regardless of the network load they introduce to the network. Different Quality of Service (QoS) models are being proposed in the literature, such as the price-controlled best-effort model, which introduces the general idea of usage-sensitive or variable pricing. Other possible models include per-packet or per-volume flat rate pricing, and flat rate pricing dependent on the QoS class, to name just a few. In practically all proposed models, a price is established for each network connection (sometimes also for data buffers on network nodes, i.e., routers).


One of the issues for the proposed pricing mechanisms is the calculation of the total cost of data transfer, which is basically the sum of the costs incurred along the network path, or in other words, the summed costs for data transfer over each node-to-node connection. One possible solution would be to include the information about the highest price the user is prepared to pay per transferred MB ("bid price") over the entire path in his data stream. For each step along the route, the network node which controls data entry onto the connection would subtract the connection price from the price indicated in the data stream. This would be repeated along each path the data stream is passing. It is possible that the highest price is too small to cover the entire route, so the proposition assumes at least two QoS classes - paid and unpaid traffic. The user pays according to the actual connection price, not according to his bid. The question is, however, whether the proposed schema will work in practice. For this, the stability of the system should be examined. If the basic model gives acceptable estimates, the model can be used to test different pricing policies.


Communication networks are being explored mostly using discrete event simulations and queuing systems. A GoldSim model was built in which the traffic in the communication network is represented as the flow of data between network nodes, enabling the use of different simulation approach, namely the systems dynamics simulation methodology.

Additional Reading

For more information, check out the full article in the Spring 2005 newsletter.


Making Better Decisions In An Uncertain World