Optical Burst Switching (OBS) is a new paradigm for future all-optical networks. It has been noted that performance of an OBS node depends on the wavelength assignment algorithm that is used. In this paper we present a new class of wavelength allocation algorithms
called cost-based algorithms. We note that bursts compete for more types of resources than wavelengths alone. For example if a given burst is to be allocated successfully, a Fiber Delay Line (FDL) or a wavelength converter may have to be used. It can be expected,
however, that the set of available resources will be limited. If at a given time all the converters are used, then any arriving burst will have to be allocated on the same wavelength - if it is available. Similarly, the unavailability of FDLs will decrease the probability of a burst being accepted. In a cost-based algorithm, each resource is assigned a metric (or price). Channels are priced according to their suitability for a particular burst. When a control packet arrives at a core node, all the possible ways of handling the corresponding burst are found (the outgoing channel, with or without a FDL or wavelength converter), and the one with a lowest metric is chosen. To show how the performance of a cost-based algorithm
compares to other algorithms we present the results of our simulations for a node with full conversion capability and a shared FDL.