Resource reservation with a market-based protocol: what prices to expect?

Authors:
JöRg H. Lepler;Karsten Neuhoff
Affiliations:
Cambridge University, Computer Laboratory, 15 JJ Thomson Avenue, Cambridge CB3 0FD, UK;Cambridge University, Faculty of Economics, Sidgwick Avenue, Cambridge CB3 9DD, UK
Venue:
Computer Communications
Year:
2003

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Abstract

A reservation protocol and pricing model is proposed for the allocation of electronic services, such as computing and communication resources. Whereas centralised allocation mechanisms are frequently analysed, and therefore better understood, we focus on a decentralised, bilateral market, employing a new protocol to enable application agents to request price quotes and to book resource capacity from resource providers. In contrast to existing protocols we allow for competition between providers. Contracts and prices are confidential; therefore, resource providers can only collect information from their own bilateral trades and from requests for price quotes. They determine the optimal price with a supply function that is extended to continuous trading by updating the optimal price quotes with new information. We implement the protocol in a simulation, show that the equilibrium prices are above competitive levels and demonstrate that simple deviations from the pricing model are not profitable.