Revenue-maximizing pricing and resource allocation of differentiated services

The introduction of service differentiation in communication networks needs a multi-tiered pricing structure. In this paper, we analyze a communication network providing differentiated services for heterogeneous users by Paris Metro Pricing scheme, which is a very simple scheme to provide differentiated services. Basing on modeling strategies of users and the service provider, we answer the important question: how should the service provider optimally set prices and allocate resources for different services to maximize its revenue of overall services. To simplify the analysis the problem is firstly solved on the assumption that services are implicitly supplied, and then we extend the solution into a more realistic situation where services are explicitly supplied.