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Dynamic Capacity Contraction: A Framework for Congestion-Sensitive Pricing

This paper proposes a framework called "Dynamic capacity contracting" implementable using the differentiated services architecture in the Internet. A particularly interesting aspect of this framework is its use in implementing congestion-sensitive pricing. The central idea of congestionsensitive pricing is a network that could, based upon congestion monitoring mechanisms, raise prices and vary contract terms dynamically. We develop a specific congestion-sensitive pricing scheme in the framework and present a preliminary performance evaluation of its technical and economic efficiency aspects, and position it relative to prior work by Clark and Varian /Mac-Kie Mason.