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33
Internet economics: The use of Shapley value for ISP settlement
 Proceedings of 2007 ACM Conference on Emerging network experiment and technology (CoNEXT
, 2007
"... cslui.cse.cuhk.edu.hk Within the current Internet, autonomous ISPs implement bilateral agreements, with each ISP establishing agreements that suit its own local objective to maximize its profit. Peering agreements based on local views and bilateral settlements, while expedient, encourage selfish rou ..."
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Cited by 37 (9 self)
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cslui.cse.cuhk.edu.hk Within the current Internet, autonomous ISPs implement bilateral agreements, with each ISP establishing agreements that suit its own local objective to maximize its profit. Peering agreements based on local views and bilateral settlements, while expedient, encourage selfish routing strategies and discriminatory interconnections. From a more global perspective, such settlements reduce aggregate profits, limit the stability of routes, and discourage potentially useful peering/connectivity arrangements, thereby unnecessarily balkanizing the Internet. We show that if the distribution of profits is enforced at a global level, then there exist profitsharing mechanisms derived from the coalition games concept of Shapley value and its extensions that will encourage these selfish ISPs who seek to maximize their own profits to converge to a Nash equilibrium. We show that these profit sharing schemes exhibit several fairness properties that support the argument that this distribution of profits is desirable. In addition, at the Nash equilibrium point, the routing and connecting/peering strategies maximize aggregate network profits, encourage ISP connectivity so as to limit balkanization. 1.
Games on Networks
, 2012
"... We provide an overview and synthesis of the literatures analyzing games where players are connected via a network structure. We study, in particular, the impact of the structure of the network on individuals’ behaviors. We focus on the game theoretic modeling, but also include some discussion of ana ..."
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Cited by 13 (8 self)
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We provide an overview and synthesis of the literatures analyzing games where players are connected via a network structure. We study, in particular, the impact of the structure of the network on individuals’ behaviors. We focus on the game theoretic modeling, but also include some discussion of analyses of peer effects, as well as applications to diffusion, employment, crime, industrial organization, and education.
MarkovPerfect Network Formation  An Applied Framework for Bilateral Oligopoly and Bargaining in BuyerSeller Networks
, 2013
"... We develop a tractable and applicable dynamic model of network formation with transfers in the presence of externalities. Our primary application is bilateral oligopoly and bargaining in buyerseller networks. The framework takes as primitives each agent’s static profits, and provides the equilibriu ..."
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Cited by 11 (4 self)
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We develop a tractable and applicable dynamic model of network formation with transfers in the presence of externalities. Our primary application is bilateral oligopoly and bargaining in buyerseller networks. The framework takes as primitives each agent’s static profits, and provides the equilibrium recurrent class of networks and negotiated transfers. Agents anticipate future changes to the network, and links may be costly to form, maintain, or break. We detail the computation and estimation of a MarkovPerfect equilibrium in this environment, and illustrate the approach using simulated data motivated by insurerhospital negotiations. We explore the impact of hospital mergers on negotiated payments, insurer premiums, and consumer welfare, and demonstrate how accounting for dynamics yields substantively different predictions than traditional static approaches.
Local dynamics in network formation
 in Proc. 2008 Third World Congress of the Game Theory Society
"... We study a dynamic network formation game. Alternately, agents are allowed to add, remove or replace links among them. The goal of each of them is to maximize his own payoff, which is a function of the final network. We focus on local actions, where each agent is allowed to add, remove or replace on ..."
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Cited by 10 (1 self)
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We study a dynamic network formation game. Alternately, agents are allowed to add, remove or replace links among them. The goal of each of them is to maximize his own payoff, which is a function of the final network. We focus on local actions, where each agent is allowed to add, remove or replace only one link per turn. We prove that the problem of finding a best global response is NPhard, while finding a best local response can be done in polynimal time. We show that for a general class of payoff functions, which is based on axiomatic properties, localNash and globalNash networks always exist. Also, we show that the dynamic process of iterated local actions converges with probability 1 to a localNash network. Moreover, this localNash network is also globalNash.
Influence functions, followers and command games
, 2008
"... Abstract. We study and compare two frameworks: a model of influence, and command games. In the influence model, in which players are to make a certain acceptance/rejection decision, due to influence of other players, the decision of a player may be different from his inclination. We study a relation ..."
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Cited by 8 (5 self)
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Abstract. We study and compare two frameworks: a model of influence, and command games. In the influence model, in which players are to make a certain acceptance/rejection decision, due to influence of other players, the decision of a player may be different from his inclination. We study a relation between two central concepts of this model: influence function, and follower function. We deliver sufficient and necessary conditions for a function to be a follower function, and we describe the structure of the set of all influence functions that lead to a given follower function. In the command structure introduced by Hu and Shapley, for each player a simple game called the command game is built. One of the central concepts of this model is the concept of command function. We deliver sufficient and necessary conditions for a function to be a command function, and describe the minimal sets generating a normal command game. We also study the relation between command games and influence functions. A sufficient and necessary condition for the equivalence between an influence function and a normal command game is delivered. JEL Classification: C7, D7
Networks and Economic Behavior
, 2008
"... Recent analyses of social networks, both empirical and theoretical, are discussed, with a focus on how social networks influence economic behavior, as well as how social networks form. Some challenges of such research are discussed as are some of the important considerations for the literature going ..."
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Cited by 7 (0 self)
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Recent analyses of social networks, both empirical and theoretical, are discussed, with a focus on how social networks influence economic behavior, as well as how social networks form. Some challenges of such research are discussed as are some of the important considerations for the literature going forward.
The Shapley profit for content, transit and eyeball ISPs
 Rep., 2010 [Online]. Available: http:// dnapubs.cs.columbia.edu/citation/paperfile/169/TR.pdf
"... Internet service providers (ISPs) depend on one another to provide global network services. However, the profitseeking nature of the ISPs leads to selfish behaviors that result in inefficiencies and disputes in the network. This concern is at the heart of the “network neutrality ” debate, which als ..."
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Cited by 2 (0 self)
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Internet service providers (ISPs) depend on one another to provide global network services. However, the profitseeking nature of the ISPs leads to selfish behaviors that result in inefficiencies and disputes in the network. This concern is at the heart of the “network neutrality ” debate, which also asks for an appropriate compensation structure that satisfies all types of ISPs. Our previous work showed in a general network model that the Shapley value has several desirable properties, and that if applied as the profit model, selfish ISPs would yield globally optimal routing and interconnecting decisions. In this paper, we use a more detailed and realistic network model with three classes of ISPs: content, transit, and eyeball. This additional detail enables us to delve much deeper into the implications of a Shapley settlement mechanism. We derive closedform Shapley values for more structured ISP topologies and develop a dynamic programming procedure to compute the Shapley values under more diverse Internet topologies. We also identify the implications on the bilateral compensation between ISPs and the pricing structures for differentiated services. In practice, these results provide guidelines for solving disputes between ISPs and for establishing regulatory protocols for differentiated services and the industry. I.
ANC Analytical Payoff Functions for Networks with Endogenous Bilateral Long Cheap Talk
, 2002
"... We improve upon "a, b, c or d " in threeagent AumannMyerson (1988) (AM) like network games with any valuation function or any payoff allocation rule. We do so by assuming understandable "longboundedcheap talk " in the AM link proposal game. In AM, the decision to form a bi ..."
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Cited by 1 (0 self)
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We improve upon "a, b, c or d " in threeagent AumannMyerson (1988) (AM) like network games with any valuation function or any payoff allocation rule. We do so by assuming understandable "longboundedcheap talk " in the AM link proposal game. In AM, the decision to form a bilateral communication link by pairs of agents depends on (a) "fixed " Myerson (1977) values−a payoff allocation rule−of the induced graphs; (b) inefficiency and (c) multiple equilibria are possible. Cheap talk in the AM game is modelled in an almost non cooperative (ANC) way: (1) Pairs bargain in a smooth Nash (1950) demand game over credible expected payoffs induced by Nash equilibria of a (2) simultaneous double proposal−payoffs and future bilateral coordination schemes−game. A link forms if double proposals "coincide " and payoff proposals add to the sum of the two agents ’ Myerson (1977) values in the prospective graph.(3) It is "almost " assumed that schemes are reminded chronologically "behind closed doors " as there is "almost " a natural firstmover advantage. From (1), the decision to form a link depends on a "variable Myerson value pair " that accounts for future possibilities of link formation. From (3), the key multiplicity problem in AM with conflicting requests of two agents towards a an indifferent third one is solved; as coordination on requests by earlier linked pairs prevails if credible. Outcomes are efficient. ANC analytical payoff functions exist for all AM like games. We state some of the complete key formulas and other results only derived for the AM game: In strictly superadditive games, only two link graphs form. If a one linkcoalition of two agentsforms then they can achieve what the grand coalition can. Issue (d): particularity of results ∗Thanks to Leonid Hurwicz; Maria Montero, Roger Myerson, Roberto Serranofor referring me kindly to his related papers, Jun Wako and David Levinethat made me aware "in a minute " that I may had been dealing with cheap talk. Originally: "An Extension of the AumannMyerson..." 1
Eight degrees of separation
 Research in Economics
, 2011
"... The paper presents a model of network formation where every connected couple give a contribution to the aggregate payoff, eventually discounted by their distance, and the resources are split between agents through the Myerson value. As equilibrium concept we adopt a refinement of pairwise stability. ..."
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Cited by 1 (0 self)
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The paper presents a model of network formation where every connected couple give a contribution to the aggregate payoff, eventually discounted by their distance, and the resources are split between agents through the Myerson value. As equilibrium concept we adopt a refinement of pairwise stability. The only parameters are the number N of agents and a constant cost k for every agent to maintain any single link. This setup shows a wide multiplicity of equilibria, all of them connected, as k ranges over non trivial cases. We are able to show that, for any N, when the equilibrium is a tree (acyclical connected graph), which happens for high k, and there is no decay, the diameter of such a network never exceeds 8 (i.e. there are no two nodes with distance greater than 8). Adopting no decay and studying only trees, we facilitate the analysis but impose worstcase scenarios: we conjecture that the limit of 8 should apply for any possible nonempty equilibrium with
An Analytical Solution for Networks of Oldest Friends
, 2006
"... Sequentially Nash Credible Joint Plans (SN) as in Nieva (February 2006) are shown to exist also whenever actions sets are infinite in a modification of all threeplayer AumannMyerson (1988) (AM) bilateral link formation games. In contrast to AM, binding transfers can occur if pairs match pairs of ..."
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Cited by 1 (1 self)
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Sequentially Nash Credible Joint Plans (SN) as in Nieva (February 2006) are shown to exist also whenever actions sets are infinite in a modification of all threeplayer AumannMyerson (1988) (AM) bilateral link formation games. In contrast to AM, binding transfers can occur if pairs match pairs of non negative payoff proposals out of the sum of their Myerson values (1977) in the prospective network. Pairs can also enunciate simultaneous negotiation statements about payoffrelevant play and bargain cooperatively over payoffs induced by tenable and reliable joint plans where the disagreement one suggests link rejection. A SN is for the most the one that suggests credibly−so followed through−the Nash solution in the bargaining game. In contrast to the bargaining network literature and the transfer game in Bloch and Jackson (2005), the one here is bilateral, sequential and has unique payoff predictions. In strictly superadditive cooperative games the complete graph never forms. The simple majority game yields the nucleolus in coalition structure.