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Pricing under information asymmetry for a large population of users

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Abstract

In this paper, we study optimal nonlinear pricing policy design for a monopolistic network service provider in the face of a large population of users of different types described by a given probability distribution. In an earlier work (Shen and Başar in IEEE J. Sel. Areas Commun. 25(6):1216–1223, 2007), we had considered games with symmetric information, in the sense that either users’ true types are public information available to all parties, or each user’s true type is private information known only to that user. In this paper, we study the intermediate case with information asymmetry; that is, users’ true types are shared information among the users themselves, but are not disclosed to the service provider. The problem can be formulated as an incentive-design problem, for which an ε-team optimal incentive (pricing) policy has been obtained, which almost achieves Pareto optimality for the service provider. A comparative study between games with information symmetry and asymmetry are conducted as well to evaluate the service provider’s game preferences.

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Authors and Affiliations

  1. Environmental Energy Technologies Division, Lawrence Berkeley National Laboratory, Berkeley, CA, 94720, USA

    Hongxia Shen

  2. ECE Department, CSL, ITI, and Beckman Institute, University of Illinois, Urbana, IL, 61801, USA

    Tamer Başar

Authors
  1. Hongxia Shen
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  2. Tamer Başar
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Corresponding author

Correspondence to Hongxia Shen.

Additional information

The first author was with the Coordinated Science Laboratory, University of Illinois, Urbana, IL 61801, USA, when this work was done. This work was supported in part by the National Science Foundation (NSF) under Grant ANI-031976. An earlier version was presented at the Workshop on Game Theory in Communication Networks (GameComm2007), held in Nantes, France, October 27, 2007.

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Shen, H., Başar, T. Pricing under information asymmetry for a large population of users. Telecommun Syst 47, 123–136 (2011). https://doi.org/10.1007/s11235-010-9306-2

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  • DOI: https://doi.org/10.1007/s11235-010-9306-2

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