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A network economic game theory model of a service-oriented internet with choices and quality competition

Author

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  • Anna Nagurney

    ()

  • Dong Li
  • Tilman Wolf

    ()

  • Sara Saberi

Abstract

This paper develops a new dynamic network economic model of Cournot-Nash competition for a service-oriented Internet in the case of service differentiation and quality competition. Each service provider seeks to maximize its own profit by determining its service volumes and service quality. We utilize variational inequality theory for the formulation of the governing Nash equilibrium as well as for the computational approach. We then construct the projected dynamical systems model, which provides a continuous-time evolution of the service providers service volumes and service quality levels, and whose set of stationary points coincides with the set of solutions to the variational inequality problem. We recall stability analysis results using a monotonicity approach and construct a discrete-time version of the continuous-time adjustment process, which yields an algorithm, with closed form expressions at each iteration. The algorithm is then utilized to compute the solutions to several numerical examples. A sensitivity analysis is also conducted. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Anna Nagurney & Dong Li & Tilman Wolf & Sara Saberi, 2013. "A network economic game theory model of a service-oriented internet with choices and quality competition," Netnomics, Springer, vol. 14(1), pages 1-25, November.
  • Handle: RePEc:kap:netnom:v:14:y:2013:i:1:p:1-25
    DOI: 10.1007/s11066-013-9076-6
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    File URL: http://hdl.handle.net/10.1007/s11066-013-9076-6
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    References listed on IDEAS

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    1. Nagurney, Anna & Dupuis, Paul & Zhang, Ding, 1994. "A Dynamical Systems Approach for Network Oligopolies and Variational Inequalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 28(3), pages 263-283, September.
    2. Nagurney, Anna, 2010. "Supply chain network design under profit maximization and oligopolistic competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(3), pages 281-294, May.
    3. Faulhaber, Gerald R & Hogendorn, Christiaan, 2000. "The Market Structure of Broadband Telecommunications," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 305-329, September.
    4. Pio Baake & Thorsten Wichmann, 1999. "On the economics of Internet peering," Netnomics, Springer, vol. 1(1), pages 89-105, October.
    5. Gibbens, R. & Mason, R. & Steinberg, Richard, 2000. "Internet service classes under competition," LSE Research Online Documents on Economics 23577, London School of Economics and Political Science, LSE Library.
    6. Anna Nagurney & Min Yu & Qiang Qiang, 2011. "Supply chain network design for critical needs with outsourcing," Papers in Regional Science, Wiley Blackwell, vol. 90(1), pages 123-142, March.
    7. Nagurney, Anna & Yu, Min, 2012. "Sustainable fashion supply chain management under oligopolistic competition and brand differentiation," International Journal of Production Economics, Elsevier, vol. 135(2), pages 532-540.
    8. Dafermos, Stella & Nagurney, Anna, 1987. "Oligopolistic and competitive behavior of spatially separated markets," Regional Science and Urban Economics, Elsevier, vol. 17(2), pages 245-254.
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    Citations

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    Cited by:

    1. Anna Nagurney & Ladimer Nagurney, 2015. "A game theory model of cybersecurity investments with information asymmetry," Netnomics, Springer, vol. 16(1), pages 127-148, August.
    2. Anna Nagurney & Tilman Wolf, 2014. "A Cournot–Nash–Bertrand game theory model of a service-oriented Internet with price and quality competition among network transport providers," Computational Management Science, Springer, vol. 11(4), pages 475-502, October.
    3. Li, Dong & Nagurney, Anna, 2015. "A general multitiered supply chain network model of quality competition with suppliers," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 336-356.
    4. Nagurney, Anna & Saberi, Sara & Shukla, Shivani & Floden, Jonas, 2015. "Supply chain network competition in price and quality with multiple manufacturers and freight service providers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 77(C), pages 248-267.
    5. Nagurney, Anna & Li, Dong & Nagurney, Ladimer S., 2014. "Spatial price equilibrium with information asymmetry in quality and minimum quality standards," International Journal of Production Economics, Elsevier, vol. 158(C), pages 300-313.

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