A Participation Incentive Market Mechanism for Allocating Heterogeneous Network Services

Abstract

This paper studies an auction based allocation of network resources for short-term contracts for heterogeneous network services. The combinatorial winner selection yields the optimal resources allocation in a single-round auction for heterogeneous resources. However, the recurring nature of auction for network services causes least wealthy bidders to exit the auction as they persistently lose under the traditional combinatorial winner selection that focuses only on revenue maximization. Such exits decrease price competition and may cause a collapse of the selling prices and revenues of network service providers. We introduce and evaluate a novel auction based network resource allocation and pricing mechanism for heterogeneous network services. The proposed mechanism prevents collapse of the selling prices and the auctioneer's revenues, stabilizes auction market, and enhances social welfare by allowing larger subset of users to become occasional winners of auction rounds than the traditional combinatorial winner selection does.