Truth-telling reservations (Q943871)

A procedure of reservations of bursty resources is proposed, which induces users to reveal their true likelihood that they will purchase a given resource. In the case of two period reservation the procedure is as follows: at the first period the user submits the probability \(q\) with which he suppose to use the resource at the second period. Then he pays \(f(q)\) if he uses the resource at the second period and \(g(q)\) otherwise. The authors construct functions \(f\) and \(g\) to enforce the user provide the true value \(q\) and make the reservation profitable for both the user and the provider. Such contact can be regarded as an ``option'' of a price \(g(q)\) in the period 1 to buy the resource at price \(f(q)-g(q)\) in period 2. Multiperiod options construction and their optimal pricing are discussed.