A double-auction mechanism for mobile data-offloading markets with strategic agents

We consider a recently proposed double-auction mechanism for mobile data-offloading. Network operators (users) derive benefit from offloading their traffic to third party WiFi or femtocell network (link-supplier). A link-supplier experiences costs for the additional capacity that he provides. Users and link-supplier (collectively referred to as agents) have their utilities and cost function as private knowledge. A system-designer decomposes the problem into a network problem (with surrogate utilities and surrogate cost functions) and agent problems (one per agent). The surrogate utilities and cost functions are modulated by the agents' bids. Agents' payoffs and costs are then determined by the allocations and prices set by the system designer. So long as the agents do not anticipate the effect of their actions, a competitive equilibrium exists as a solution to the network and agent problems, and this equilibrium optimizes the system utility. This work shows that when the agents are strategic (price-anticipating), the presence of strategic supplying agents drives the system to an undesirable equilibrium with zero participation. This is in stark contrast to the setting when link-suppliers are not strategic where the efficiency loss is at most 34%. The paper then proposes a Stackelberg game modification to alleviate the efficiency loss problem. The system designer first announces the allocation and payment functions. He then invites the supplying agents to announce their bids. He then invites the users to respond to the suppliers' bids. The resulting efficiency loss is characterized in terms of the suppliers' cost functions.