Pricing, Competition, and Routing in Multi-hop Networks

We study multi-hop relay networks where pricing is used to provide incentives for forwarding traffic. In these networks, nodes price their services strategically to maximize its profit from forwarding traffic, and allocate their received traffic to service providers to minimize the amount paid. In the resulting pricing game, we show that the socially optimal network routing can always be induced by an equilibrium. However, inefficient equilibria also exist. In particular, we show that inefficiencies stem from the intrinsic multi-hop network structure and can give rise to an infinite price of anarchy. This phenomenon is a fundamental issue for multi-hop networks, which persists even when the source has elastic demand.