Network Economics and the Allocation of Savings: A Model of Peering in the Voice-over-IP Telecommunications Market (Lecture Notes in Economics and Mathematical Systems Book 653)

This book provides a game theoretic model of interaction among VoIP telecommunications providers regarding their willingness to enter peering agreements with one another. The author shows that the incentive to peer is generally based on savings from otherwise payable long distance fees. At the same time, termination fees can have a countering and dominant effect, resulting in an environment in which VoIP firms decide against peering. Various scenarios of peering and rules for allocation of the savings are considered. The first part covers the relevant aspects of game theory and network theory, trying to give an overview of the concepts required in the subsequent application. The second part of the book introduces first a model of how the savings from peering can be calculated and then turns to the actual formation of peering relationships between VoIP firms. The conditions under which firms are willing to peer are then described, considering the possible influence of a regulatory body. Front Matter....Pages i-xv Front Matter....Pages 7-7 Motivation and Nontechnical Overview....Pages 1-6 The Theory of Games....Pages 9-118 Network Theory in Economics....Pages 119-155 Front Matter....Pages 157-157 Telecommunications and the Internet....Pages 159-177 A Model of Peering Among VoIP Firms....Pages 179-234 Network Formation in Peering....Pages 235-267 Concluding Remarks, Recommendations, and Future Research....Pages 269-272 Appendix A Selected Mathematical Concepts....Pages 273-285 Back Matter....Pages 287-297 1. Motivation and nontechnical overview ---- 2. The theory of games-- 3. Network theory in economics-- 4. Telecommunications and the Internet-- 5. A model of peering among VoIP firms-- 6. Network formation in peering-- 7. Concluding remarks.