Economics of network pricing with multiple ISPs

Srinivas Shakkottai, R. Srikant

Research output: Contribution to journalArticlepeer-review


In this paper, we examine how transit and customer prices and quality of service are set in a network consisting of multiple ISPs. Some ISPs may face an identical set of circumstances in terms of potential customer pool and running costs. We examine the existence of equilibrium strategies in this situation and show how positive profit can be achieved using threat strategies with multiple qualities of service. It is shown that if the number of ISPs competing for the same customers is large then it can lead to price wars. ISPs that are not co-located may not directly compete for users, but are nevertheless involved in a non-cooperative game of setting access and transit prices for each other. They are linked economically through a sequence of providers forming a hierarchy, and we study their interaction by considering a multi-stage game. We also consider the economics of private exchange points and show that their viability depends on fundamental limits on the demand and cost.

Original languageEnglish (US)
Pages (from-to)1233-1244
Number of pages12
JournalIEEE/ACM Transactions on Networking
Issue number6
StatePublished - Dec 2006


  • Internet economics
  • Peering and transit
  • Quality of service
  • Repeated games
  • Stackelberg games

ASJC Scopus subject areas

  • Software
  • Computer Science Applications
  • Computer Networks and Communications
  • Electrical and Electronic Engineering


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