A. Serdar Simsek

Research

• Work-in-Progress
  
  

  • Network Pricing and the Price Of Anarchy
    (Working Paper) with R. Phillips.
    
    Abstract
    We consider a network of perishable resources in which products are defined by combinations of connecting edges. One example is an airline network where the edges correspond to flight legs and the products to itineraries serving different origin-destination pairs. We consider cases in which different revenue-maximizing ‘‘controllers’’ control the prices associated with different edges and the price of the product is the sum of the prices of the constituent edges. At one extreme, a single controller might set all edge prices – at the other extreme there might be a different controller associated with each edge. We show that decentralized pricing always leads to lower total revenue relative to centralized pricing. We develop bounds on the “price of anarchy” – that is the loss from totally decentralized control versus centralized control – as networks grow large. We consider both the uncapacitated and capacitated cases and present provably convergent algorithms for calculating Nash equilibrium prices in both cases. While we develop our model in the context of airline pricing, it is directly applicable to any service network such as freight transportation, pipelines, and toll roads as well as to the more general case of supply chain networks.