Pricing Infrastructure-as-a-Service for online two-sided platform providers

Abstract

Infrastructure-as-a-Service (IaaS) is expected to grow at a rapid pace in the next few years. This is primarily because of the flexibility that it offers satisfying variable demand in computing power without any fixed investments in computing capacity. Our work focuses on a particular customer segment of IaaS-online platform providers (OPP). These businesses experience fluctuations in the number of users of their platforms, which impacts advertising revenues. Therefore, it is necessary for these businesses to support any sudden surge in demand without excessive upfront investments in computing infrastructure. IaaS offers an attractive option for such businesses. Pricing of IaaS for OPP is trickier as IaaS providers must consider the fluctuations in the number of users of such platforms while designing a plan. We model these fluctuations and their impact on the revenue of the platform providers to design an optimal pricing plan. � 2014 Macmillan Publishers Ltd.