The allocation of computer resources—is pricing the answer?

Abstract

The widespread use of complex third generation computing systems has led to a much broader concern about the means by which the resources of these systems are allocated among the user community. One means that is suggested more and more frequently is a pricing procedure. In this paper the manner in which one would like to allocate computing resources is considered, and then the extent to which a pricing mechanism fits this mold is discussed. Inasmuch as pricing must serve as a rationing mechanism at times, consideration is given to the means by which prices can be adjusted flexibly in order to make a dynamic allocation of resources. Consideration is also given to the means by which users can be insulated from the harmful effects of frequent price fluctuations. Although the subject of pricing has been given a lot of attention recently, a number of misconceptions persist about its purpose and its operation. An attempt is made to clarify some of these misunderstandings and to highlight the advantages and disadvantages of pricing. Two illustrative pricing systems are also discussed in order to demonstrate the applicability of pricing in quite different environments.