The Dynamics of Price, Revenue, and System Utilization

Content delivery is a growing enterprise in the Internet. Critical to the management of content delivery systems is understanding customer behavior, its impact on the consumption of system resources and how together, these affect revenue. We believe that price dictates overall customer behavior and that understanding the relationship between price and customer behavior is the key to effective system management. To this end, we study the impact of price on revenue and system utilization. Our service model is based on customers being able to refuse content based on their capacity to pay and their willingness to pay the price quoted. We quantify the effects of such customer behavior on revenue and system utilization. Since customer behavior and characteristics are highly varying and not known a priori, we develop an adaptive pricing model which tracks user behavior as well as the arrival process to maximize revenue. We validate it using simulation. Our simulation results indicate that the adaptive pricing scheme generates nearly the same revenue as the theoretical expectation under very dynamic workloads.