 in data networks. If the amount of data being transmitted exceeds the capacity, there can be some information loss due to capacity constraints. 14 The efficient price reflects the disutility of blocked calls, where *, M*, and W* solve the maximization problem. 15 This analysis is closely related to the theory of externalities and to the theory of club goods (Cornes and Sandler 1986). Our analysis in this section extends the discussion of congestion to employ the queuing model that is typically used to study blocked calls in telephone networks. For a related queuing model with congestion costs, see Walrand and Varaiya (2000). See also Mackie-Mason and Varian (1995a) and Gupta et al. (1997). Pricing Network Services A data transmission typically is divided into smaller components such as pack- ets. The packets are independently transmitted over a link, or more generally, over the network. In a packet-switched network, a data transmission is divided into packets at or near its origin and the packets are transmitted over the network, often over different paths. The packets are addressed individually, just as are letters in a postal system. The packets are reassembled into the original data transmission at or near the destination. When the capacity of the network is exceeded, packets can be lost, resulting in lost information from data transmissions. This section presents a highly simplified discussion of information loss. To understand the basics of information loss, suppose that a network provides a transmission service to one customer. The service can be provided with a single link or with a more general network. The capacity or bandwidth of the network is represented by K. The customer has uncertain data transmission needs represented by a truncated probability distribution over the amount of data transmitted per unit of time, F(Q)/F(h), that is defined on the interval [0,h]. Let (0) = 0 and let f(Q) be the probability density, where the cumulative distribution F(Q) is defined on [0, 80]. The quality of service t