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Strategic network formation through peering and service agreements

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  • Anshelevich, Elliot
  • Shepherd, F.B.
  • Wilfong, Gordon

Abstract

We introduce a game theoretic model of network formation in an effort to understand the complex system of business relationships between various Internet entities (e.g., Autonomous Systems, enterprise networks, residential customers). In our model we are given a network topology of nodes and links where the nodes act as the players of the game, and links represent potential contracts. Nodes wish to satisfy their demands, which earn potential revenues, but may have to pay their neighbors for links incident to them. We incorporate some of the qualities of Internet business relationships, including customer-provider and peering contracts. We show that every Nash equilibrium can be represented by a circulation flow of utility with certain constraints. This allows us to prove bounds on the prices of anarchy and stability. We also focus on the quality of equilibria achievable through centralized incentives.

Suggested Citation

  • Anshelevich, Elliot & Shepherd, F.B. & Wilfong, Gordon, 2011. "Strategic network formation through peering and service agreements," Games and Economic Behavior, Elsevier, vol. 73(1), pages 17-38, September.
    • Handle: RePEc:eee:gamebe:v:73:y:2011:i:1:p:17-38
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    References listed on IDEAS

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    5. Sudipta Sarangi & H. Haller, 2003. "Nash Networks with Heterogeneous Agents," Departmental Working Papers 2003-06, Department of Economics, Louisiana State University.
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    7. Juan Larrosa & Fernando Tohme, 2003. "Network Formation with Heterogenous Agents," Microeconomics 0301002, University Library of Munich, Germany.
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