Algorithmic Pricing of Online Services


September 27, 2011


Cloud computing is a quickly growing business. Questions exist as to the proper business model, and this translates into how to model this, considering auction and game theory. Models exist to purchase on-demand and per-use, as well as to buying in bulk and making longer-term commitments. Regarding supply and demand, marginal costs in cloud computing are among the challenges. External forces, such as electrical costs, are variables out of the control of the hosting company. Another factor is simply time, where optimal prices cannot be exactly determined because of time shifting by consumers. Finding the optimal portfolio of computing products requires both strategic and tactical aspects of pricing, found through combining optimization, algorithms, and game theory.