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Strategic Network Formation through Peering and Service Agreements

Summary: Strategic Network Formation
through Peering and Service Agreements
Elliot Anshelevich
Bruce Shepherd
Gordon Wilfong
April 2006
We introduce a game theoretic model of network formation in an effort to understand the complex
system of business relationships between various Internet entities (e.g., Autonomous Systems, enterprise
networks, residential customers). This system is at the heart of Internet connectivity. In our model we are
given a network topology of nodes and links where the nodes (modeling the various Internet entities) act
as the players of the game, and links represent potential contracts. Nodes wish to satisfy their demands,
which earn potential revenues, but nodes may have to pay (or be paid by) their neighbors for links
incident to them. By incorporating some of the qualities of Internet business relationships, we hope that
our model will have predictive value. Specifically, we assume that contracts are either customer-provider
or peering contracts. As often occurs in practice, we also include a mechanism that penalizes nodes if
they drop traffic emanating from one of their customers.
We first show that every Nash equilibrium can be represented by a flow of utility with certain con-
straints. Apart from helping to visualize the general structure of stable solutions and providing useful
proof techniques, this yields a polynomial time algorithm for finding Nash equilibria that successfully


Source: Anshelevich, Elliot - Department of Computer Science, Rensselaer Polytechnic Institute


Collections: Computer Technologies and Information Sciences