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Problem definition: Inspired by new developments in dynamic spectrum access, we study the dynamic pricing of wireless Internet access when demand and capacity (bandwidth) are stochastic. Academic/practical relevance: The demand for wireless Internet access has increased enormously. However, the spectrum available to wireless service providers is limited. The industry has, thus, altered conventional license-based spectrum access policies through unlicensed spectrum operations. The additional spectrum obtained through these operations has stochastic capacity. Thus, the pricing of this service by the service provider has novel challenges. The problem considered in this paper is, therefore, of high practical relevance and new to the academic literature. Methodology: We study this pricing problem using a Markov decision process model in which customers are posted dynamic prices based on their bandwidth requirement and the available capacity. Results: We characterize the structure of the optimal pricing policy as a function of the system state and of the input parameters. Because it is impossible to solve this problem for practically large state spaces, we propose a heuristic dynamic pricing policy that performs very well, particularly when the ratio of capacity to demand rate is low. Managerial implications: We demonstrate the value of using a dynamic heuristic pricing policy compared with the myopic and optimal static policies. The previous literature has studied similar systems with fixed capacity and has characterized conditions under which myopic policies perform well. In contrast, our setting has dynamic (stochastic) capacity, and we find that identifying good state-dependent heuristic pricing policies is of greater importance. Our heuristic policy is computationally more tractable and easier to implement than the optimal dynamic and static pricing policies. It also provides a significant performance improvement relative to the myopic and optimal static policies when capacity is scarce, a condition that holds for the practical setting that motivated this research.
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On the Optimality of Greedy Policies in Dynamic Matching
Hindsight Optimality in Two-Way Matching Networks In “On the Optimality of Greedy Policies in Dynamic Matching”, Kerimov, Ashlagi, and Gurvich study centralized dynamic matching markets with finitely many agent types and heterogeneous match values. A matching policy is hindsight optimal if the policy can (nearly) maximize the total value simultaneously at all times. The article establishes that suitably designed greedy policies are hindsight optimal in two-way matching networks. This implies that there is essentially no positive externality from having agents waiting to form future matches. Proposed policies include the greedy longest-queue policy, with a minor variation, as well as a greedy static priority policy. The matching networks considered in this work satisfy a general position condition. General position is a weak (but necessary) condition that holds when the static-planning problem (a linear program that optimizes the first-order matching rates) has a unique and nondegenerate optimal solution.
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- Award ID(s):
- 2137286
- PAR ID:
- 10538046
- Publisher / Repository:
- INFORMS
- Date Published:
- Journal Name:
- Operations Research
- ISSN:
- 0030-364X
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1287/opre.2021.0596
