Pricing, Competition, and Routing for Selfish and Strategic Nodes in Multi-hop Relay Networks

TL;DR

This paper analyzes a pricing and routing game in multi-hop relay networks where nodes act selfishly, showing conditions for equilibrium and quantifying efficiency loss through the price of anarchy.

Contribution

It characterizes equilibrium routing and pricing strategies in multi-hop relay networks and analyzes the efficiency loss in strategic settings.

Findings

Socially optimal routing can be achieved at equilibrium.

Inefficient equilibria may exist, leading to potential efficiency loss.

Price of anarchy is finite for oligopolies with concave costs, infinite otherwise.

Abstract

We study a pricing game in multi-hop relay networks where nodes price their services and route their traffic selfishly and strategically. In this game, each node (1) announces pricing functions which specify the payments it demands from its respective customers depending on the amount of traffic they route to it and (2) allocates the total traffic it receives to its service providers. The profit of a node is the difference between the revenue earned from servicing others and the cost of using others' services. We show that the socially optimal routing of such a game can always be induced by an equilibrium where no node can increase its profit by unilaterally changing its pricing functions or routing decision. On the other hand, there may also exist inefficient equilibria. We characterize the loss of efficiency by deriving the price of anarchy at inefficient equilibria. We show that the price of anarchy is finite for oligopolies with concave marginal cost functions, while it is infinite for general topologies and cost functions.