Title: Why are prices fixed? On the limits of spot pricing for large markets
Abstract: Many providers in large markets for provisionable resources (such a cloud computing) employ so called 'pay as you go' schemes where customers can request resources at fixed prices. In case of scarcity, they are then served in a first come first serve manner, taking no regard of potentially differing values. At face value, this often seems inefficient, as selling via a dynamically priced spot market instead would allow high value customers to have priority in case of scarcity, leading to higher payments. However, spot offerings require customers to reason about and submit bids and have an all-around higher complexity than fixed prices. In this talk we consider the effect of these implicit cost on the viability of spot pricing mechanisms. While these costs may be very low, we show that they nonetheless dominate any potential profit gains if a market contains enough sufficiently independent customers. Consequently, fixed-price offerings become profit optimal for large markets.
