A New Price Mechanism Inducing Peers to Achieve Optimal Welfare
Today’s Internet is a loose federation of independent network providers, each acting in their own self interest. With the ISPs forming with peer relationship under this economic reality,  proves that the total cost of “hot potato” routing is much worse than the optimal cost and then gives a price mechanism—one ISP charges the other a price per unit flow, to prevent this phenomenon. However, with its mechanism the global welfare loss may be arbitrarily high. In this paper we propose a new price mechanism—one ISP charges the other a given fee for different flow scale. With our mechanism, we show that if both ISPs agree on splitting the flow according to the max global welfare the charging ISP will get more profit and the charged ISP will achieve the least cost. And our new mechanism can almost eliminate the welfare loss. Finally, some instances are given and the results show that our mechanism is much more effective than that in .
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