TY - GEN
T1 - The Price of Simplicity
AU - Shakkottai, Srinivas
AU - Srikant, R.
AU - Ozdaglar, Asuman
AU - Acemoglu, Daron
PY - 2007
Y1 - 2007
N2 - We study revenue-maximizing pricing by a service provider in a communication network and compare revenues from simple pricing rules to the maximum revenues that are feasible. In particular, we focus on flat entry fees as the simplest pricing rule. We provide a lower bound for the ratio between the revenue from this pricing rule and maximum revenue, which we refer to as the Price of Simplicity. We characterize what types of environments lead to a low Price of Simplicity and show that in a range of environments, the loss of revenue from using simple entry fees is small. We then study the Price of Simplicity for a simple non-linear pricing (price discrimination) scheme based on the Paris Metro Pricing. The service provider creates different service classes and charges differential entry fees for these classes. We show that the gain from this type of price discrimination is small, particularly in environments in which the simple entry fee pricing leads to a low Price of Simplicity.
AB - We study revenue-maximizing pricing by a service provider in a communication network and compare revenues from simple pricing rules to the maximum revenues that are feasible. In particular, we focus on flat entry fees as the simplest pricing rule. We provide a lower bound for the ratio between the revenue from this pricing rule and maximum revenue, which we refer to as the Price of Simplicity. We characterize what types of environments lead to a low Price of Simplicity and show that in a range of environments, the loss of revenue from using simple entry fees is small. We then study the Price of Simplicity for a simple non-linear pricing (price discrimination) scheme based on the Paris Metro Pricing. The service provider creates different service classes and charges differential entry fees for these classes. We show that the gain from this type of price discrimination is small, particularly in environments in which the simple entry fee pricing leads to a low Price of Simplicity.
UR - http://www.scopus.com/inward/record.url?scp=50249161143&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=50249161143&partnerID=8YFLogxK
U2 - 10.1109/ACSSC.2007.4487469
DO - 10.1109/ACSSC.2007.4487469
M3 - Conference contribution
AN - SCOPUS:50249161143
SN - 9781424421107
T3 - Conference Record - Asilomar Conference on Signals, Systems and Computers
SP - 1450
EP - 1454
BT - Conference Record of the 41st Asilomar Conference on Signals, Systems and Computers, ACSSC
T2 - 41st Asilomar Conference on Signals, Systems and Computers, ACSSC
Y2 - 4 November 2007 through 7 November 2007
ER -