A Game-Theoretic Analysis for Complementary and Substitutable IoT Services Delivery With Externalities

Abstract

The Internet of Things (IoT) connects mobile and wireless devices, and enables the IoT service providers to deliver IoT services to the mobile users in various applications, e.g., transportation and communications. In this paper, the problem of IoT service delivery management is studied with the consideration of substitutability, complementarity, and externalities of delivering IoT services due to the diversity of different IoT components in mobile systems. The substitutable IoT services have similar functionalities to serve IoT users, and the IoT users can switch to buy service from any IoT service provider. The complementary IoT services have different functionalities to serve IoT users, and the IoT users may request a bundle of IoT services from multiple IoT service providers as their IoT services can be integrated. Externalities represent the situation in which IoT users in the same system can affect the utilities of each other due to the connections and interference among the IoT users, which leads to the presence of network effect and congestion effect. To analyze the impact of these factors on the performance of IoT systems, a multi-leader multi-follower Stackelberg game model is introduced. Therein, the IoT service providers and IoT users make their strategic decisions in terms of pricing and service requests, respectively, toward their individual objectives in a distributed manner. A closed-form equilibrium solution is derived analytically through backward induction.