Incentives and pricing in communications networks

In this chapter, we study two types of pricing mechanisms: one where the goal of the pricing scheme is to achieve some socially beneficial objective for the network and the other where prices are set by multiple competing service providers to maximize their revenues. For both cases, we present an overview of the mathematical models involved and the relevant optimization and game-theoretic techniques needed to study these models. We study the impact of different degrees of strategic interactions among users and between users and service providers on the network performance. We also relate our models and solutions to practical resource allocation mechanisms used in communication networks such as congestion control, routing, and scheduling. We conclude the chapter with a brief introduction to other game-theoretic topics in emerging networks. This chapter studies the problem of decentralized resource allocation among competing users in communication networks. The growth in the scale of communication networks and the newly emerging interactions between administrative domains and end users with different needs and quality of service requirements necessitate new approaches to the modeling and control of communication networks that recognize the difficulty of formulating and implementing centralized control protocols for resource allocation. The current research in this area has developed a range of such approaches. Central to most of these approaches is the modeling of end users and sometimes also of service providers as self-interested agents that make decentralized and selfish decisions.