Pricing and incentives in peer-to-peer networks

Peer-to-peer (P2P) networks offer a cost effective and easily deployable framework for sharing user-generated content. However, intrinsic incentive problems reside in P2P networks as the transfer of content incurs costs both to uploaders and to downloaders while the benefit accrues only to downloaders. We investigate the issues of incentives in content production and sharing over P2P networks using a game theoretic model. Peers do not share produced content at all at non-cooperative equilibria whereas Pareto efficiency requires peers to fully share produced content. There is also a divergence in the total amount of produced content between non-cooperative equilibria and Pareto efficiency. By imposing full sharing, we decompose the inefficiency of non-cooperative equilibria into two parts, inefficiency due to no sharing and inefficiency due to underproduction. As a method to remedy the incentive problems in P2P networks, two classes of pricing schemes, MP pricing schemes and linear pricing schemes, are proposed. We show that the proposed pricing schemes can achieve Pareto efficiency as non-cooperative equilibria. We also examine a linear pricing scheme that maximizes the revenue of the network manager.