Stabilizing markets via a novel auction based pricing mechanism for short-term contracts for network services

Abstract

This paper studies pricing mechanisms for short-term contracts for network services in a recurring auction with sealed bids. We propose and evaluate a novel winner selection policy in such an auction. The new approach was motivated by an observation that in a recurring auction enough customers must be willing to participate in future auction rounds to prevent collapse of prices. Using simulations, we compare the proposed mechanism with traditional ones. The results demonstrate that the new method (i) increases revenues of the network service provider, (ii) minimizes loss of fairness, and (iii) enlarges the active customer base of a recurring auction.