Bid-Based Approach for Pricing Web Service
We consider a problem of Web service resource allocation in an economic setting. We assume that different requestors have different valuations for services and a deadline for executing a service, after which it is no longer required. We formally show an optimal offline allocation that maximizes the total welfare, denoted as the total benefit of the requestors. We then propose a bid-based approach to resource allocation and pricing for Web services. Using a detailed simulation, we analyze its behavior and performance compared to other known algorithms. We empirically show that flexibility in service price benefits both the provider in terms of profit and the requestors in terms of welfare.
Our problem motivation stems from the expanding use of Service-Oriented Architecture (SOA) for outsourcing enterprize activities. While the most common method for pricing a Web service nowadays is a fixed-price policy (with a price of 0 in many cases), A Service-Oriented Architecture will increasingly generate competition among providers, underlying the importance of finding methodologies for pricing Web service execution.
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