Luce BROTCORNE

Pricing Problems in Telecommunication: Models and Solution Methods

Over the last two decades, the telecommunication industry has undergone dramatic changes.. Among the most significant are the modications in technology and market structure, the latter through the breakup of monopolies. Traditionally, large regulated and protected monopolies have dominated the telecommunication market, providing economies of scale, universal services, and stability in terms of service availability. In the current context of deregulation, pricing of network services has come to play a key role in a context characterized by uncertainty and demand fluctuation.

In the first part of the talk, we outline some issues faced by telecommunication firms with respect to pricing, such as revenue increase and congestion control. Next we present a bilevel model for a generic joint design and pricing problem (JDP), which is relevant to telecommunication operators who must manage demand through technological improvements, or through cooperation with other operators. According to the bilevel programming paradigm, operators integrate within their pricing and design policies the rational reaction of consumers to the price schedules. We propose for the solution of JDP an adaptation of Lagrangian relaxation within a bilevel framework. Preliminary numerical results will be presented.

This work is conducted in collaboration with Patrice Marcotte and Gilles Savard.