Dynamic pricing in the presence of participation-dependent social learning

Qian Ma, Biying Shou, Jianwei Huang, Tamer Başar

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

For Internet-based services, users' quality of service (QoS) depends on not only the available resource (capacity) but also the number of users who use the resource simultaneously (e.g., congestion effect). When a new Internet-based service provider first enters the market, there can be uncertainties regarding both the capacity and congestion, and hence the uncertainty of QoS. In this paper, we consider a participation-dependent social learning over the QoS through users' online reviews, where the QoS changes with the number of review participants. We study how such a learning process affects the provider's dynamic pricing strategy. With a simple two-period model, we analyze the strategic interactions between the provider and the users, and characterize the provider's optimal two-period dynamic pricing policy. Our results show that when the capacity is small or the users' prior QoS belief is high, the provider will choose a higher introductory price in the first period (than the price in the second period). This is in sharp contrast with the common practice of setting a lower introductory price to attract users (when congestion is not an issue). Furthermore, the learning process is beneficial to the provider with a large capacity.

Original languageEnglish (US)
Title of host publicationMobihoc 2018 - Proceedings of the 2018 19th International Symposium on Mobile Ad Hoc Networking and Computing
PublisherAssociation for Computing Machinery
Pages101-110
Number of pages10
ISBN (Electronic)9781450357708
DOIs
StatePublished - Jun 26 2018
Event19th ACM International Symposium on Mobile Ad-Hoc Networking and Computing, MobiHoc 2018 - Los Angeles, United States
Duration: Jun 26 2018Jun 29 2018

Publication series

NameProceedings of the International Symposium on Mobile Ad Hoc Networking and Computing (MobiHoc)

Other

Other19th ACM International Symposium on Mobile Ad-Hoc Networking and Computing, MobiHoc 2018
CountryUnited States
CityLos Angeles
Period6/26/186/29/18

Keywords

  • Dynamic pricing
  • Participation
  • Social learning
  • Stochastic game

ASJC Scopus subject areas

  • Hardware and Architecture
  • Computer Networks and Communications
  • Software

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  • Cite this

    Ma, Q., Shou, B., Huang, J., & Başar, T. (2018). Dynamic pricing in the presence of participation-dependent social learning. In Mobihoc 2018 - Proceedings of the 2018 19th International Symposium on Mobile Ad Hoc Networking and Computing (pp. 101-110). (Proceedings of the International Symposium on Mobile Ad Hoc Networking and Computing (MobiHoc)). Association for Computing Machinery. https://doi.org/10.1145/3209582.3209593