Stochastic Modeling of Internet Service for Profit Optimization in Uganda

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We consider an internet cafe faced with an optimal choice of bandwidth for internet users under stochastic stationary demand. The choice is made over uniformly time horizons with a goal of optimizing profits. Considering customer demand, price and operating costs of internet service, we formulate a finite state Markov decision process model where states of a Markov chain represent possible states of demand for internet service. A profit matrix is generated; representing the long run measure of performance for the Markov decision process problem. The problem is to determine an optimal bandwidth adjustment policy so that the long run profits are maximized for a given state of demand. The bandwidth adjustment policies are determined using dynamic programming over a finite period planning horizon. Results from a case study demonstrate the existence of an optimal statedependent option for bandwidth adjustment and profits in providing internet service.



Bandwidth adjustment; internet service; modelling; profit optimization; stochastic demand