Optimal pricing of capacitated networks

  • Authors:

  • Alexander Grigoriev;Joyce van Loon;René Sitters;Marc Uetz

  • Affiliations:

  • Department of Quantitative Economics, Maastricht University, P.O. Box 616, NL–6200 MD Maastricht, The Netherlands;Department of Quantitative Economics, Maastricht University, P.O. Box 616, NL–6200 MD Maastricht, The Netherlands;Department of Mathematics and Computer Science, Eindhoven University of Technology, P.O. Box 513, NL–5600 MB Eindhoven, The Netherlands;Department of Applied Mathematics, University of Twente, P.O. Box 217, NL–7500 AE Enschede, The Netherlands

  • Venue:
  • Networks
  • Year:
  • 2009

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Abstract

We address the algorithmic complexity of a profit maximization problem in capacitated, undirected networks. We are asked to price a set of m capacitated network links to serve a set of n potential customers. Each customer is interested in purchasing a network connection that is specified by a simple path in the network and has a maximum budget that we assume to be known to the seller. The goal is to decide which customers to serve, and to determine prices for all network links in order to maximize the total profit. We address this pricing problem in different network topologies. More specifically, we derive several results on the algorithmic complexity of this profit maximization problem, given that the network is either a path, a cycle, a tree, or a grid. Our results include approximation algorithms as well as inapproximability results. © 2008 Wiley Periodicals, Inc. NETWORKS, 2009