Maximal Profit Dimensioning and Tariffing of Loss Networks

Abstract

In this paper we present a unified approach to the optimal dimensioning and tariffing of loss networks. In our formulation the optimum is chosen to maximize the profit for the company operating the loss network. We assume that the operating company has the flexibility to determine tariffs and grade of service — although both of these can possibly be subject to regulatory constraints. The fact that the tariffing may affect demand and, hence, the dimensioning makes it essential that the operating company include the tariff/demand trade-off in determining the optimal way to dimension the loss network. A consequence of our formulation is that the optimal tariff structure has a particularly simpl..