Congestion and price competition in the cloud

This paper proposes a model to study the interaction of pricing and congestion in the cloud computing marketplace. Specifically, we develop a three-tier market model that captures a marketplace with users purchasing services from Softwareas-Service (SaaS) providers, which in turn purchase computing resources from either Provider-as-a-Service (PaaS) providers or Infrastructure-as-a-Service (IaaS) providers. Within each level, we define and characterize competitive equilibria. Further, we use these characterizations to understand the relative profitability of SaaSs and PaaSs/IaaSs and to understand the impact of price competition on the user experienced performance. Our results highlight that both of these depend fundamentally on the degree to which congestion results from shared or dedicated resources in the cloud. We evaluate the inefficiency of user performance by studying the ‘price of anarchy’ and show that it grows with the non-linearity of the congestion functions for cloud resources.