Dynamic Pricing of Applications in Cloud Marketplaces using Game Theory

The competitive nature of Cloud marketplaces as new concerns in delivery of services makes the pricing policies a crucial task for firms. so that, pricing strategies has recently attracted many researchers. Since game theory can handle such competing well this concern is addressed by designing a normal form game between providers in current research. A committee is considered in which providers register for improving their competition based pricing policies. The functionality of game theory is applied to design dynamic pricing policies. The usage of the committee makes the game a complete information one, in which each player is aware of every others payoff functions. The players enhance their pricing policies to maximize their profits. The contribution of this paper is the quantitative modeling of Cloud marketplaces in form of a game to provide novel dynamic pricing strategies; the model is validated by proving the existence and the uniqueness of Nash equilibrium of the game

A Competition-based Pricing Strategy in Cloud Markets using Regret Minimization Techniques

Cloud computing as a fairly new commercial paradigm, widely investigated by different researchers, already has a great range of challenges. Pricing is a major problem in Cloud computing marketplace; as providers are competing to attract more customers without knowing the pricing policies of each other. To overcome this lack of knowledge, we model their competition by an incomplete-information game. Considering the issue, this work proposes a pricing policy related to the regret minimization algorithm and applies it to the considered incomplete-information game. Based on the competition based marketplace of the Cloud, providers update the distribution of their strategies using the experienced regret. The idea of iteratively applying the algorithm for updating probabilities of strategies causes the regret get minimized faster. The experimental results show much more increase in profits of the providers in comparison with other pricing policies. Besides, the efficiency of a variety of regret minimization techniques in a simulated marketplace of Cloud are discussed which have not been observed in the studied literature. Moreover, return on investment of providers in considered organizations is studied and promising results appeared

Service provisioning problem in cloud and multi-cloud systems

Cloud computing is a new emerging paradigm that aims to streamline the on-demand provisioning of resources as services, providing end users with flexible and scalable services accessible through the Internet on a pay-per-use basis. Because modern cloud systems operate in an open and dynamic world characterized by continuous changes, the development of efficient resource provisioning policies for cloud-based services becomes increasingly challenging. This paper aims to study the hourly basis service provisioning problem through a generalized Nash game model. We take the perspective of Software as a Service (SaaS) providers that want to minimize the costs associated with the virtual machine instances allocated in a multiple Infrastructures as a Service (IaaS) scenario while avoiding incurring penalties for execution failures and providing quality of service guarantees. SaaS providers compete and bid for the use of infrastructural resources, whereas the IaaSs want to maximize their revenues obtained providing virtualized resources. We propose a solution algorithm based on the best-reply dynamics, which is suitable for a distributed implementation. We demonstrate the effectiveness of our approach by performing numerical tests, considering multiple workloads and system configurations. Results show that our algorithm is scalable and provides significant cost savings with respect to alternative methods (5% on average but up to 260% for individual SaaS providers). Furthermore, varying the number of IaaS providers means an 8%-15% cost savings can be achieved from the workload distribution on multiple IaaSs

Essays on Cloud Pricing and Causal Inference

In this thesis, we study economics and operations of cloud computing, and we propose new matching methods in observational studies that enable us to estimate the effect of green building practices on market rents. In the first part, we study a stylized revenue maximization problem for a provider of cloud computing services, where the service provider (SP) operates an infinite capacity system in a market with heterogeneous customers with respect to their valuation and congestion sensitivity. The SP offers two service options: one with guaranteed service availability, and one where users bid for resource availability and only the "winning" bids at any point in time get access to the service. We show that even though capacity is unlimited, in several settings, depending on the relation between valuation and congestion sensitivity, the revenue maximizing service provider will choose to make the spot service option stochastically unavailable. This form of intentional service degradation is optimal in settings where user valuation per unit time increases sub-linearly with respect to their congestion sensitivity (i.e., their disutility per unit time when the service is unavailable) -- this is a form of "damaged goods." We provide some data evidence based on the analysis of price traces from the biggest cloud service provider, Amazon Web Services. In the second part, we study the competition on price and quality in cloud computing. The public "infrastructure as a service" cloud market possesses unique features that make it difficult to predict long-run economic behavior. On the one hand, major providers buy their hardware from the same manufacturers, operate in similar locations and offer a similar menu of products. On the other hand, the competitors use different proprietary "fabric" to manage virtualization, resource allocation and data transfer. The menus offered by each provider involve a discrete number of choices (virtual machine sizes) and allow providers to locate in different parts of the price-quality space. We document this differentiation empirically by running benchmarking tests. This allows us to calibrate a model of firm technology. Firm technology is an input into our theoretical model of price-quality competition. The monopoly case highlights the importance of competition in blocking "bad equilibrium" where performance is intentionally slowed down or options are unduly limited. In duopoly, price competition is fierce, but prices do not converge to the same level because of price-quality differentiation. The model helps explain market trends, such the healthy operating profit margin recently reported by Amazon Web Services. Our empirically calibrated model helps not only explain price cutting behavior but also how providers can manage a profit despite predictions that the market "should be" totally commoditized. The backbone of cloud computing is datacenters, whose energy consumption is enormous. In the past years, there has been an extensive effort on making the datacenters more energy efficient. Similarly, buildings are in the process going "green" as they have a major impact on the environment through excessive use of resources. In the last part of this thesis, we revisit a previous study about the economics of environmentally sustainable buildings and estimate the effect of green building practices on market rents. For this, we use new matching methods that take advantage of the clustered structure of the buildings data. We propose a general framework for matching in observational studies and specific matching methods within this framework that simultaneously achieve three goals: (i) maximize the information content of a matched sample (and, in some cases, also minimize the variance of a difference-in-means effect estimator); (ii) form the matches using a flexible matching structure (such as a one-to-many/many-to-one structure); and (iii) directly attain covariate balance as specified ---before matching--- by the investigator. To our knowledge, existing matching methods are only able to achieve, at most, two of these goals simultaneously. Also, unlike most matching methods, the proposed methods do not require estimation of the propensity score or other dimensionality reduction techniques, although with the proposed methods these can be used as additional balancing covariates in the context of (iii). Using these matching methods, we find that green buildings have 3.3% higher rental rates per square foot than otherwise similar buildings without green ratings ---a moderately larger effect than the one previously found

Strategic and Blockchain-based Market Decisions for Cloud Computing

The cloud computing market has been in the center of attention for years where cloud providers strive to survive by either competition or cooperation. Some cloud providers choose to compete in the market that is dominated by few large providers and try to maximize their profit without sacrificing the service quality which leads to higher user ratings. Many research proposals tried to contribute to the cloud market competition. However, the majority of these proposals focus only on pricing mechanisms, neglecting thus the cloud service quality and users satisfaction. Meanwhile, cloud providers intend to form cloud federations to enhance their services quality and revenues. Nevertheless, traditional centralized cloud federations have strict challenges that might hinder the members' motivation to participate in, such as formation of stable coalitions with long-term commitments, participants' trustworthiness, shared revenue, and security of the managed data and services. For a stable and trustworthy federation, it is vital to avoid blind-trust on the claimed SLA guarantees from the members and monitor the quality of service considering the various characteristics of cloud services. This thesis aims to tackle the issues of cloud computing market from the two perspectives of competition and cooperation by: 1) modeling and solving the conflicting situation of revenue, user ratings and service quality, to improve the providers position in the market and increase the future users' demand; 2) proposing a user-centric game theoretical framework to allow the new and smaller cloud providers to have a share in the market and increase users satisfaction through providing high quality and added-value services; 3) motivating the cloud providers to adopt a coopetition behavior through a novel, fully distributed blockchain-based federation's structure that enables them to trade their computing resources through smart contracts; 4) introducing a new role of oracle as a verifier agent to monitor the quality of service and report to the smart contract agents deployed on the blockchain while optimizing the cost of using oracles; and 5) developing a Bayesian bandit learning oracles reliability mechanism to select the oracles smartly and optimize the cost and reliability of utilized oracles. All of the contributions are validated by simulations and implementations using real-world data