Spot pricing of secondary access to wireless spectrum

Recent deregulation initiatives aim to alleviate looming wireless spectrum shortage. Thus, they enable providers to lease their excess spectrum for secondary usage. Efficient and robust pricing policies are an integral part of the success of these deregulation efforts. In this dissertation, we investigate the problem of optimal spot pricing of spectrum in the presence of both non-elastic primary users and elastic secondary users whose arrival rate is regulated by a price-dependent demand function. The goal of this dissertation is to devise simple, yet efficient, pricing policies that can handle the inherent uncertainty in demand and in call statistics.We first introduce occupancy-based pricing policies and prove their insensitivity to the call length distribution. We show how to compute the optimal occupancy-based policy using stochastic dynamic programming. We provide numerical evidence that the optimal occupancy-based policy performs close to the optimal general policy, which depends on the call length distribution.Next, we investigate the design of computationally-efficient single-price policies. We show that a threshold policy is the optimal single-price policy and performs close to the optimal policy. We introduce a novel concept of "profit region" that determines the range of primary user arrival rate for which a policy is profitable. Under mild assumptions imposed on the demand function, we show that the profit region of the threshold policy is optimal. In addition, we show that it is unimodal with respect to price, which enables efficient computation of the optimal threshold policy.Finally, we introduce a new on-line pricing algorithm called Measurement-based Threshold Policy (MTP) that operates by measuring the reaction of secondary users to a specific price and does not require the demand function to be known. We prove that while MTP optimizes a profit function that can be multimodal, it converges to a local optimum as fast as if the function were unimodal. We further provide an adaptive version that adjusts the operating price and threshold to changing demand function and call statistics.In summary, the results of this dissertation will benefit efforts to create a functioning secondary market for wireless spectrum.