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Published December 2017 | metadata_only
Journal Article

The Economics of the Cloud


This article proposes a model to study the interaction of price competition and congestion in the cloud computing marketplace. Specifically, we propose a three-tier market model that captures a marketplace with users purchasing services from Software-as-a-Service (SaaS) providers, which in turn purchase computing resources from either Provider-as-a-Service (PaaS) or Infrastructure-as-a-Service (IaaS) providers. Within each level, we define and characterize market 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, that is, the "price of anarchy" of the cloud marketplace. Our results highlight that both of these depend fundamentally on the degree to which congestion results from shared or dedicated resources in the cloud.

Additional Information

© 2017 ACM. Received March 2017; accepted April 2017. This work was supported in part by NSF grants CNS-1518941, CNS-1319820, EPAS-1307794, CNS-0846025, and the Hong Kong RGC GRF 14205114.

Additional details

August 19, 2023
August 19, 2023