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The Shapley Value: Its Use and Implications on Internet Economics

The Shapley Value: Its Use and Implications on Internet Economics. Richard T.B. Ma Columbia University Dah-ming Chiu, John C.S. Lui The Chinese University of Hong Kong Vishal Misra, Dan Rubenstein Columbia University. Outline. ISP Practices and Associated Problems

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The Shapley Value: Its Use and Implications on Internet Economics

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  1. The Shapley Value: Its Use and Implications on Internet Economics Richard T.B. Ma Columbia University Dah-ming Chiu, John C.S. Lui The Chinese University of Hong Kong Vishal Misra, Dan Rubenstein Columbia University

  2. Outline • ISP Practices and Associated Problems • Profit Sharing and Shapley Value • Shapley Mechanism and Incentive Properties • Future work

  3. What is an Internet Service Provider (ISP)? • The Internet is composed of Autonomous Systems (ASes). • An ISP is a business entity. • Might comprise multiple ASes. • Provide Internet access. • Objective: maximizeprofits. ISP

  4. Different classes of players • Eyeball ISPs • Provide Internet access to customers: • Place Large investment in infrastructure. • E.g. AT&T, Verizon … • Content ISPs • Provide contents via the Internet. • Serve customers like: • Transit ISPs • Tier 1 ISPs: global connectivity of the Internet. • Provide transit services for other ISPs. • Cover a large geographic area.

  5. ISP Settlement Problems: a Macro Perspective Net Neutrality Debate: Whether or not to provider Service Differentiation? Service Differentiation Information Neutrality Eyeball Content Providers Transit Network Balkanization: De-peering between ISPs Transit Transit zero-dollar peering How to appropriately share profits among ISP?

  6. ISP Practices: a Micro Perspective Provider ISP Three levels of decisions • Interconnecting decision E • Routing decisions R (via BGP) • Bilateral financial settlements f Settlement faffects E, R Interconnection withdrawal provider charges, customer might want to save money Hot-potato Routing Customer/provider relationship Route change Peering relationship Source Destination Shortest Path Routing Customer ISP Customer ISP

  7. How to share profit? -- the baseline case • Consider a PC market with only one operating system provider and one micro-processor provider. • Egalitarian profit sharing:

  8. How to share profit? -- more players • Symmetry: two micro-processor providers obtain the same profit. • Efficiency: summation of three companies’ profit equal V. • Balanced Contribution:

  9. How to share profit? -- eyeball and content ISPs • The unique solution (Shapley value) that satisfies EfficiencySymmetry and Balanced Contribution:

  10. Results and implications of ISP profit sharing • Each ISP’s profit is • Inversely proportional to the number of ISPs of its type. • Proportional to the number of ISPs of the opposite type. • Intuitions and explanations • The more of the same kind provide substitutions. • The less of a kind can obtain more leverage.

  11. $$$ j(E,R) $$ $$ A clean-slate multilateral settlement Provider ISP Recall: three levels of decisions • Interconnecting decision E • Routing decisions R • Bilateral financial settlements f The Shapley value settlements j jcollects revenue from customers jredistributes profits to ISPs E, R follow fromj Settlement faffects E, R Customer/provider relationship Peering relationship Customer ISP

  12. Individual ISP’s selfish behavior Each ISP makes local interconnecting and routing decisions. Given:j Local decisions:Ei,Ri Objective: to maximizeji(E,R) Ei Ri

  13. Incentive results -- optimal routing • Assumptions: • Aggregate Profit = Total Revenue – Total Routing Cost. • Profits are distributed via the Shapley value solution. • Fixed interconnecting topology. • ISPs locally decide routes to maximize their profits. • Theorem (Incentive for routing): Any ISP maximizes its profit by locally minimizing the global routing cost. • Implication: ISPs adapt to global min-cost routes. • Corollary (Nash Equilibrium): Any global min cost routing decision is a Nash equilibrium for the set of all ISPs. • Implication: global min-cost routes are stable. Surprise: Selfish local behavior coincides with global optimal solution!

  14. Incentive results -- interconnecting • Assumptions: • Aggregate Profit = Total Revenue – Total Routing Cost. • Profits are distributed via the Shapley value solution. • For any topology, ISPs use global min-cost routes. • ISPs locally decide interconnections to maximize their profits. • Theorem (Incentive for interconnecting): Both interconnecting ISPs have non-decreasing profits. • Implication: ISPs have incentive to interconnect. • Does not mean: All pairs of ISPs should be connected. • Redundant links might not reduce routing costs. • Sunk cost is not considered.

  15. Summary • Ideal profit-sharing solution – the Shapley value • Efficiency,Symmetry and Balanced Contribution. • Additivity, Strong Monotonicity, Dummy … • Close-form solution for eyeball/content ISPs. • ISP incentives under the Shapley value solution • Incentive to use global optimal routes. • Incentive to interconnect.

  16. Future Work and New Results • Include Transit ISPs • General Internet Topology • Implications for Bilateral Agreements among ISPs

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