A Dynamic Network Economic Model of a Service-Oriented Internet with Price and Quality Competition
In this paper, we develop a dynamic network economic model of a service-oriented Internet with price and quality competition using projected dynamical systems theory. This research, is motivated, in part, by the Future Generation Internet (FGI), which will need to handle a spectrum of requirements of next-generation applications. The decision-makers are the content providers and the transport network providers who select the prices that they charge as well as the quality levels of their content and network provision, respectively. Consumers, that is, users at the demand markets, respond through the demand functions which reflect the attractiveness of the composition of content and network services as reflected by the prices charged and the quality levels. We prove that the stationary points of the projected dynamical system coincide with the set of solutions of a variational inequality problem and provide qualitative analysis, including stability analysis results. In addition, we describe an algorithm, which yields a discrete-time approximation of the continuous-time adjustment processes until a stationary point, equivalently, an equilibrium, is achieved. The computational procedure is then applied to solve numerical examples in order to demonstrate the generality of the framework.
This research was supported by the National Science Foundation (NSF) grant CISE #1111276, for the NeTS: Large: Collaborative Research: Network Innovation Through Choice project awarded to the University of Massachusetts Amherst. This support is gratefully acknowledged.
The first author thanks the organizers of the Network Models in Economics and Finance Conference: Professors Valery Kalyagin, Panos M. Pardalos, and Themistocles M. Rassias, which took place in Athens, Greece, June 13–15 2013, for the opportunity to present a plenary talk. This paper was inspired, in part, by her presentation and related research.
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