Using k-Pricing for Penalty Calculation in Grid Market

To distribute risk in Grid, the design of service level agreements (SLAs) plays an important role, since these contracts determine the price for a service at an agreed quality level as well as the penalties in case of SLA violation. This paper proposes a price function over the quality of service(QoS) on the basis of the agreements negotiated upon price and quality objective. This function defines fair prices for every possible quality of a service, which are in line with the business of the customer and incentivize the provider to supply welfare-maximizing quality. Therewith, penalties can be calculated for every possible quality level as the difference between the agreed price and the output of the price function for the effectively met quality. A price function according to the k-pricing scheme is presented for a single service scenario and for a scenario with multiple interdependent services.