A Network Economic Game Theory Model of a Service-Oriented Internet with Price and Quality Competition in Both Content and Network Provision

Sara Saberi (), Anna Nagurney () and Tilman Wolf ()
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Sara Saberi: Department of Operations and Information Management, Isenberg School of Management, University of Massachusetts Amherst, Amherst, Massachusetts 01003
Anna Nagurney: Department of Operations and Information Management, Isenberg School of Management, University of Massachusetts Amherst, Amherst, Massachusetts 01003; and School of Business, Economics and Law, University of Gothenburg, 405 30 Gothenburg, Sweden
Tilman Wolf: Department of Electrical and Computer Engineering, University of Massachusetts Amherst, Amherst, Massachusetts 01003

Service Science, 2014, vol. 6, issue 4, 229-250

Abstract: One key challenge in the current Internet is the inefficiency of the mechanisms by which technology is deployed and the business and economic models surrounding these processes. Customers' demands are driving the Internet and telecommunication networks toward the provision of quality-based end-to-end services, which need a richer family of performance guarantees. We believe that novel insights into future Internet structures can be obtained from taking into account the associated economic models and equilibrium conditions among providers. This paper develops a basic and a general network economic game theory model of a quality-based service-oriented Internet to study the competition among the service providers (both content and network providers). We derive the governing equilibrium conditions and provide the equivalent variational inequality formulations. An algorithm is proposed that yields closed-form expressions, at each iteration, for the prices and quality levels. To illustrate the modeling framework and the algorithm, we present computed solutions to numerical examples. The results show the generality of the proposed network economic model for a future Internet.

Keywords: oligopolies; service-oriented Internet; price competition; quality competition; Bertrand–Nash equilibrium; network economics; game theory; variational inequalities (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:inm:orserv:v:6:y:2014:i:4:p:229-250

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