Game-Theoretic Resource Pricing and Provisioning Strategies in Cloud Systems

We consider several Software as a Service (SaaS) providers that offer services using the Cloud resources provided by an Infrastructure as a Service (IaaS) provider which adopts a pay-per-use scheme similar to the Amazon EC2 service, comprising flat, on demand, and spot virtual machine instances. For this scenario, we study the virtual machine provisioning and spot pricing strategies. We consider a two-stage provisioning scheme. In the first stage, the SaaS providers determine the optimal number of required flat and on demand instances. Then, in the second stage, the IaaS provider sells its unused capacity as spot instances for which the SaaS providers compete by submitting a bid. We study two different IaaS provider pricing strategies: the first assumes the IaaS provider sets a unique price; in the second, instead, the IaaS provider can set different prices for different customers. We model the resulting problem as a Stackelberg game. For each pricing scheme, we show the existence of the game equilibrium and provide the solution algorithms. Through numerical evaluation we compare the provisioning and spot price under the two different pricing strategies as function of the system parameters.