Congestion based pricing and management of distributed computational resources

Congestion based usage pricing for management of IT resources has been discussed for several decades. However, a whole array of fundamental issues plagued productive discussions about its feasibility in computing environments. Under Prof. Whinston's leadership, co-authors of this article have participated in several projects whose primary purpose was to move the discussion of economic modeling beyond nonnative discussion to real-time computability and implementation. The research has addressed some of the fundamental objections to externality based pricing, i.e., the problem of acquiring customers private infonnation regarding their demand characteristics. The research agenda in the network and computing resources pricing has now moved to management of particular environments - from corporate networks to distributed database environments. In this article we summarize the key ideas that were generated by the research group at CREC on theory and implementation of congestion based pricing. These include issues ranging from demonstration of computational feasibility of such prices based on transient system infonnation to the issue of incentives of network infrastructure owners in the presence of multiple co-existing pricing paradigms. In addition, we will discuss and present other applications of this work and directions of future research.