A demand-based approach to optimal resource allocation for network services with Quality of Service (QoS) requirements

Quality of service (QoS) plays a key role to the economic analysis of demand for network resources (bandwidth and buffers). In the absence of any QoS consideration, users are not able to rank their preferences for resource bundles and no utility function can exist. Without such a QoS-based utility-maximizing model, demand for network resources is not possible to be derived and network usage cannot be efficient. In this paper, we assume that QoS-based preferences are expressed by means of Cobb-Douglas utility functions and we propose a demand-based approach to optimal resource allocation with QoS requirements. QoS is the ´glue´ that ties together standard economic properties and network performance characteristics. Finally, we examine the economic variables of the model and we determine the optimal amounts for each resource by means of users´ demand functions.