ISSN : 1796-2056
Volume : 4    Issue : 4    Date : June 2009

Dynamic Pricing Strategy of Provider with Different QoS Levels in Web Service
Wei Pan, Lean Yu, Shouyang Wang, Guowei Hua, Gang Xie, and Jinlong Zhang
Page(s): 228-235
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In order to improve the service provider profit, the pricing strategies in service network have been
studied, but primarily in static pricing setting without considering different quality of service (QoS)
levels. However, in real situation, providers usually dynamically adjust their prices and offer multiple
class services to meet different customers. Moreover, because service provider will satisfy
demands of customers on a specific future date, customers may cancel order. In this paper, we
establish a new dynamic pricing model to consider order cancellation ration and different QoS
levels for maximizing provider revenue. The analytical results from this new model reveal that the
optimal capacity and prices are derived via closed-form solutions. Finally, a numerical example is
presented to illustrate that the proposed method is effective for determining the optimal capacity and
prices. In addition, sensitivity analysis of the optimal capacity and profit with respect to some
important parameters are also conducted to illustrate the optimal decision characteristics.

Index Terms
pricing strategy, quality of service (QoS), cancellation ratio, web service