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Spot and Derivative Markets in Admission Control (1999) [13 citations — 3 self]

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@INPROCEEDINGS{Semret99spotand,
    author = {Nemo Semret and Aurel A. Lazar},
    title = {Spot and Derivative Markets in Admission Control},
    booktitle = {in Proc. of ITC},
    year = {1999},
    pages = {925--941},
    publisher = {Elsevier}
}

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Abstract:

We propose a new approach to pricing of capacity in service systems with blocking, using spot and derivative market mechanisms. A second-price auction among arrivals grouped in batches gives rise to the spot market of usage charges. A reservation guaranteeing access for an arbitrary duration with usage price below the bid can be made at any time before or during service, thus eliminating the risk -- inherent to the spot market -- of being dropped before service completion. We define the reservation as a hold option, which is analogous to the derivative financial instruments (e.g. options, futures) integrated over time. Based on a heavy-traffic diffusion model for the corresponding two-stage queueing system, we compute the reservation fee as the fair market price of a hold option. We validate this approach with simulations driven by a real traffic trace at a dial-up Internet access modem-pool.

Citations

345	Brownian motion and stochastic calculus – Karatzas, Shreve - 1991
88	Options, futures, and other derivatives – Hull - 1997
78	Stochastic Processes in Queueing Theory – Borovkov - 1972
32	Design and analysis of the progressive second price auction for network bandwidth sharing”, Telecommunication Systems - Special issue on Network Economics – LAZAR, SEMRET - 1999
24	The progressive second price auction mechanism for network resource sharing – Lazar, Semret - 1998
24	Market mechanisms for network resource sharing – Semret - 1999
17	Heavy-traffic approximations for service systems with blocking – Whitt - 1984
12	Limit diffusion approximations for the many server queue and the repairman problem – Iglehart - 1965
6	Di usion approximations for models of congestion control in high-speed networks – Das, Srikant - 1998
5	On the heavy-tra c limit theorem for GI/G/1 queues – Whitt - 1982
4	Diffusion approximations for models of congestion control in high-speed networks – Das, Srikant - 1998
2	Limiting di usion approximations for the many server queue and the repairman problem – Iglehart - 1965