Price Competition in an Oligopoly Market with Multiple IaaS Cloud Providers

As an increasing number of infrastructure-as-a-service (IaaS) cloud providers start to provide cloud computing services, they form a competition market to compete for users of these services. Due to different resource capacities and service workloads, users may observe different finishing times for their cloud computing tasks and experience different levels of service qualities as a result. To compete for cloud users, it is critically important for each cloud service provider to select an "optimal" price that best corresponds to their service qualities, yet remaining attractive to cloud users. To achieve this goal, the underlying rationale and characteristics in this competition market need to be better understood. In this paper, we present an in-depth game theoretic study of such a competition market with multiple competing IaaS cloud providers. We characterize the nature of noncooperative competition in an IaaS cloud market, with a goal of capturing how each IaaS cloud provider will select its optimal prices to compete with the others. Our analyses lead to sufficient conditions for the existence of a Nash equilibrium, and we characterize the equilibrium analytically in special cases. Based on our analyses, we propose iterative algorithms for IaaS cloud providers to compute equilibrium prices, which converge quickly in our study.