Truth-telling Reservations

TL;DR

This paper introduces a truthful, robust reservation mechanism for bursty resources using option contracts that incentivize honest reporting of user likelihoods, allowing adjustments and optimizing provider revenue.

Contribution

It proposes a novel reservation scheme with option contracts that ensures truthfulness, robustness, and revenue optimization based on known user preference distributions.

Findings

Users save costs through flexible options

Providers reduce under-utilization and overbooking risks

Revenue comparable to monopoly pricing with known preferences

Abstract

We present a mechanism for reservations of bursty resources that is both truthful and robust. It consists of option contracts whose pricing structure induces users to reveal the true likelihoods that they will purchase a given resource. Users are also allowed to adjust their options as their likelihood changes. This scheme helps users save cost and the providers to plan ahead so as to reduce the risk of under-utilization and overbooking. The mechanism extracts revenue similar to that of a monopoly provider practicing temporal pricing discrimination with a user population whose preference distribution is known in advance.