Individualized Pricing for a Cloud Provider Hosting Interactive Applications

33 Pages Posted: 26 Sep 2019

See all articles by Hossein Jahandideh

Hossein Jahandideh

Google Inc.

Kevin F. McCardle

University of California, Los Angeles (UCLA) - Anderson School of Management

Julie Drew

Facebook

Filippo Balestrieri

Analysis Group, Inc.

Date Written: February 9, 2019

Abstract

We consider a cloud provider which hosts interactive applications such as mobile apps and online games. Depending on the traffic of users for an application, the provider commits a subset of its resources (hardware capacity) to serve the application. The provider must choose a dynamic pricing mechanism to indirectly select the applications hosted and maximize revenue. We model the provider's pricing problem as a large-scale stochastic dynamic program. To approach this problem, we propose a tractable approach to enable decomposing the multi-dimensional stochastic dynamic program into single-dimensional subproblems. We then extend the proposed framework to define an individualized dynamic pricing mechanism for the cloud provider. We present novel upper bounds on the optimal revenue to evaluate the performance of our pricing mechanism. The computational results show that a contract-based model of selling interactive cloud services achieves significantly greater revenue than the prevalent alternative, and that our pricing scheme attains near-optimal revenue.

Keywords: Cloud Computing Services, Interactive Applications, Individualized Pricing, Approximate Dynamic Programming, Stochastic Dynamic Programming

Suggested Citation

Jahandideh, Hossein and McCardle, Kevin F. and Drew, Julie and Balestrieri, Filippo, Individualized Pricing for a Cloud Provider Hosting Interactive Applications (February 9, 2019). Available at SSRN: https://ssrn.com/abstract=3453838 or http://dx.doi.org/10.2139/ssrn.3453838

Hossein Jahandideh (Contact Author)

Google Inc. ( email )

1600 Amphitheatre Parkway
Second Floor
Mountain View, CA 94043
United States

Kevin F. McCardle

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Julie Drew

Facebook ( email )

1601 S. California Ave.
Palo Alto, CA 94304
United States

Filippo Balestrieri

Analysis Group, Inc. ( email )

111 Huntington Avenue
10th floor
Boston, MA 02199
United States

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