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

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.