In this paper, we describe two cost allocation methodologies which may be used to determine prices for a regulated telecommunications supplier offering heterogeneous services on a broadband network. Both methodologies can be characterized by sets of plausible axioms that one could argue should be satisfied by any pricing rule. One of the approaches leads to the Aumann-Shapley pricing rule, which is well known in the literature. The other approach leads to a pricing rule based on the Shapley value of a related cooperative game. While these approaches are similar in motivation, they differ in the technical requirements which must be imposed on the underlying cost function, and we argue that Shapley value pricing is more appropriate in a telecommunications context. We are able to explicitly determine Shapley value prices for customers who differ from one another in terms of their arrival rates, service rates, costs of lost work, and the number of simultaneous channels which they require.
All Science Journal Classification (ASJC) codes
- Electrical and Electronic Engineering