A Contract and Balancing Mechanism for Sharing Capacity in a Communication Network

  • Authors:
  • Edward Anderson;Frank Kelly;Richard Steinberg

  • Affiliations:
  • Australian Graduate School of Management, University of New South Wales, Sydney, Australia;Statistical Laboratory, Centre for Mathematical Sciences, Cambridge CB3 0WB, United Kingdom;Judge Business School, University of Cambridge, Cambridge CB2 1AG, United Kingdom

  • Venue:
  • Management Science
  • Year:
  • 2006

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Abstract

We propose a method for determining how much to charge users of a communication network when they share bandwidth. Our approach can be employed either when a network owner wishes to sell bandwidth for a specified period of time to a number of different users, or when users cooperate to build a network to be shared among themselves. Our proposed contract and balancing mechanism can mediate between rapidly fluctuating prices and the longer time scales over which bandwidth contracts may be traded. An advantage of the process is that it avoids perverse incentives for a capacity provider to increase congestion.