Game Theoretical Analysis of Service Provision for the Internet of Things Based on Sensor Virtualization

The advent of the Internet of Things (IoT) is expected to bring major benefits to a wide range of areas. However, the successful deployment of the IoT calls for the existence of sustainable and well-understood business models. In this paper, we propose and analyze a business model for a likely scenario in the IoT, which is made up of WSNs, service providers and users. The service providers compete against each other in the intermediation between the virtualized WSNs and the users that benefit from enhanced services built on the sensed data. The service providers pay to the WSNs for the data and charge the users for the service. The model is analyzed by applying oligopoly theory and game theory, the conditions for the existence and uniqueness of the Nash equilibrium are established, and the equilibrium and the social optimum are obtained. Our results show that the business model is sustainable, provided that the users' sensitivity to the value-to-price ratio is not negligible and, in this situation, the number of active service providers is upper bounded by a value that depends on the sensitivity and the market size. Furthermore, the operation of such a market is shown to efficiently use the information provided by the WSNs, and, when compared to the social optimum, to produce an increase in users' and service providers' surpluses, but a reduction in WSNs' surplus.