Interaction between a Service Provider and Content Providers and Social Efficiency

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ElDelgawy, Ramy
La, Richard J.
It is unclear how the introduction of "fast lanes" would affect the evolution of the Internet. While this is with no doubt an important issue, we do not aim to address this question. Instead, in this work we study the interaction between an internet service provider and one or more content providers when such fast lanes are allowed. Each entity is considered a player in a game, and it is assumed that these players are both rational and selfish, i.e., they aim to maximize their own gains. Clearly, their objectives are different, and their bargaining powers may vary. We examine how they may reach an agreement and how their interaction affects the resulting quality-of-service on the fast lanes. To get a better understanding of the kind of contract these entities may be willing to sign we look at two cases: (i) a monopoly market that has one internet service provider and one content provider and (ii) one where an extra content provider enters the market. Our findings show that, in the case of a monopoly market, an efficient contract can be reached in Stackelberg games, which maximizes the aggregate payoff of both the providers. Similarly, when another content provider enters the market, the entity with the strongest bargaining power chooses a contract that maximizes the aggregate payoff of all providers.