Algorithms for optimal price regulations

Alexander Grigoriev, Joyce van Loon, Marc Jochen Uetz

Research output: Chapter in Book/Report/Conference proceedingConference contributionAcademicpeer-review


Since summer 2007, mobile phone users in the European Union (EU) are protected by a ceiling on the roaming tariff when calling or receiving a call abroad. We analyze the effects of this price regulative policy, and compare it to alternative implementations of price regulations. The problem is a three-level mathematical program: The EU determines the price regulative policy, the telephone operator sets profit-maximizing prices, and customers choose to accept or decline the operator’s offer. The first part of this paper contains a polynomial time algorithm to solve such a three-level program. The crucial idea is to partition the polyhedron of feasible price regulative parameters into a polynomial number of smaller polyhedra such that a certain mprimitive decision problem can be written as an LP on each of those. Then the problem can be solved by a combination of enumeration and linear programming. In the second part, we analyze more specifically an instance of this problem, namely the price regulation problem that the EU encounters. Using customer-data from a large telephone operator, we compare different price regulative policies with respect to their social welfare. On the basis of the specific social welfare function, we observe that other price regulative policies or different ceilings can improve the total social welfare.
Original languageUndefined
Title of host publicationInternet And Network Economics (WINE 2008)
EditorsC. Papadimitriou, S. Zhang
Place of PublicationBerlin
Number of pages12
ISBN (Print)978-3-540-92184-4
Publication statusPublished - Dec 2008
Event4th International Workshop on Internet and Network Economics, WINE 2008: Internet And Network Economics (WINE 2008) - Shanghai, China, Shanghai, China
Duration: 17 Dec 200820 Dec 2008
Conference number: 4

Publication series

NameLecture Notes in Computer Science
PublisherSpringer Verlag
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349


Conference4th International Workshop on Internet and Network Economics, WINE 2008
Abbreviated titleWINE 2008
Other17-20 Dec, 2008


  • EWI-13418
  • IR-62457
  • METIS-254888

Cite this

Grigoriev, A., van Loon, J., & Uetz, M. J. (2008). Algorithms for optimal price regulations. In C. Papadimitriou, & S. Zhang (Eds.), Internet And Network Economics (WINE 2008) (pp. 362-373). [10.1007/978-3-540-92185-1_42] (Lecture Notes in Computer Science; Vol. 5385, No. 2). Berlin: Springer.