Distributed resource allocation in multiservice communication networks using pricing

We propose a distributed resource allocation mechanism for multiservice communication networks based on pricing incentives. We consider a network with fixed routing where classes differ in bandwidth requirements, demand pattern, call duration, and routing. We study both problems of revenue and welfare maximization and show that static (as opposed to dynamic) pricing is asymptotically optimal in a regime of many, relatively small, users. Our model incorporates demand substitution effects. We characterize the asymptotically optimal pricing structure and optimize over policy parameters to compute an effective policy away from the limiting regime. Our approach can handle large instances of the problem.