Balancing Traffic Flow Efficiency with IXP Revenue in Internet Peering

We consider a traffic peering game between Internet Service Providers (ISPs) at an Internet Exchange Point (IXP), where each ISP pair has a choice of exchanging traffic through a public IXP switch or sending the traffic through transit providers. We analyze the traffic flow efficiency (measured as social welfare) and the IXP revenue at the equilibrium of this game, as a function of the per-unit price charged by the IXP. We show that there exists a price point at which both social welfare and revenue are high, and the corresponding price-of-anarchy values can be expressed in terms of certain sublinearity measures of the inverse demand curves of the ISPs. Simulations carried out using models based on actual IXP data obtained from PeeringDB demonstrate that the theoretical bounds correctly capture the performance trends against the variation of price, and for a carefully chosen pricing point both social welfare and IXP revenue are within a factor of two of the corresponding optimal values.