Exploring economic dynamics in an Internet with service choices

Pricing of network services is a key aspect of Internet operation. Most current providers offer end-users only simple and coarse pricing choices. With technological developments for fine-grained service control and automation of dynamic contracts, it can be expected that users and applications can choose among available network service choices at fast timescales. A key question in the context of these economic dynamics is how provider competition and user choices affect price and quality of network services. In this paper, we develop an agent-based simulation system to assess these impacts on economic dynamics. We simulate a monopoly, a duopoly, and an oligopoly, where providers compete and innovate. We derive expected results for simple competition, but also observe that innovation improves a provider's competitiveness in the marketplace. Our results not only show general trends, but provide quantitative results that can help providers to explore and develop pricing strategies to maximize their profits while providing end-users with the choices they need.