A Contract and Balancing Mechanism for Sharing Capacity in a Communication Network

We propose a method for determining how much to charge users of a communication network when they share bandwidth. Our approach can be employed either when a network owner wishes to sell bandwidth for a specified period of time to a number of different users, or when users cooperate to build a network to be shared among themselves. We show how a Contract and Balancing Mechanism can be defined to mediate between rapidly fluctuating prices and the longer time scales over which bandwidth contracts might be traded. An important property of the process is that it avoids introducing perverse incentives for a capacity provider to increase congestion.