Emanuele Giovannetti - Attractors and repellors: a game theoretic interpretation of the cycles in provider-customer relations

Dhamdhere and Dovrolis (2011) studied intermitting cycles of wiring and dewiring activities. This paper interprets their evidence in the light of the dynamic game theoretic literature on price wars, needed to sustain collusion under imperfect monitoring. As a consequence of imperfect monitoring of Customers' connectivity Providers introduce temporary punishments, dewiring, to reduce the Customers' incentives to free ride. In this scenario, the length of these punishment periods is endogenously determined by the incentive compatibility constraints of the Customers. This paper focuses on the empirical assessment of the determinants of the length for punishment phases, required to ensure that actual deviations from cooperative behaviour do not occur. Possible elements determining the length of these Repellence phases are: the Customer's discount factor including the probability of the provider's survival and the probability of being mistakenly perceived of having abused the link, due to reduced traffic observability and increased traffic variability.