Pricing and Peering Strategies of Differentiated Services Content Networks

Web sites disseminate some of their information to surrogate caches in order to reduce the latency observed during the delivery of the information. The surrogates classify publishers under several classes with respect to their willingness-to-pay. Surrogate partitions the total cache capacity among different classes to provide a loose version of Quality of Service. In our model, publishers try to get as large cache space as possible, while the surrogate is required to achieve fair allocation among the publishers. Specifically, each publisher should be charged the same if they receive equal share of caching space. We determine the optimal pricing strategy of the surrogate maximizing its revenue. We also analyzed the competition between two surrogates under this model and determined the condition that leads to a Nash equilibrium. We showed that at equilibrium surrogates peer with each other as if there is a single combined surrogate server.