Incentive-Based Pricing for Network Games with Complete and Incomplete Information

Abstract

We introduce the concept of nonlinear pricing within the context of our previous Stackelberg network game model and view the Internet Service Provider’s (ISP’s) policy as an incentive policy, and the underlying game as a reverse Stackelberg game. We study this incentive-design problem under complete information as well as incomplete information. In both cases, we show that the game is not generally incentive controllable (that is, there may not exist pricing policies that would lead to attainment of a Pareto-optimal solution), but it is ɛ-incentive controllable (that is, the ISP can induce a behavior on the users that is arbitrarily close to a Pareto-optimal solution). The paper also includes a comparative study of the solutions under linear and nonlinear pricing policies, illustrated by numerical computations.

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