research-article

Competition on Price and Quality in Cloud Computing

Authors:

Cinar Kilcioglu,

Justin M. RaoAuthors Info & Claims

WWW '16: Proceedings of the 25th International Conference on World Wide Web

Pages 1123 - 1132

https://doi.org/10.1145/2872427.2883043

Published: 11 April 2016 Publication History

Abstract

The public cloud "infrastructure as a service" market possesses unique features that make it difficult to predict long-run economic behavior. On the one hand, major providers buy their hardware from the same manufacturers, operate in similar locations and offer a similar menu of products. On the other hand, the competitors use different proprietary "fabric" to manage virtualization, resource allocation and data transfer. The menus offered by each provider involve a discrete number of choices (virtual machine sizes) and allow providers to locate in different parts of the price-quality space. We document this differentiation empirically by running benchmarking tests. This allows us to calibrate a model of firm technology. Firm technology is an input into our theoretical model of price-quality competition. The monopoly case highlights the importance of competition in blocking "bad equilibrium" where performance is intentionally slowed down or options are unduly limited. In duopoly, price competition is fierce, but prices do not converge to the same level because of price-quality differentiation. The model helps explain market trends, such the healthy operating profit margin recently reported by Amazon Web Services. Our empirically calibrated model helps not only explain price cutting behavior but also how providers can manage a profit despite predictions that the market "should be" totally commoditized.

References

[1]

Amazon elastic compute cloud. https://aws.amazon.com/ec2/. Accessed: 2015-09-05.

[2]

Cloudharmony. https://cloudharmony.com/. Accessed: 2015-09-05.

[3]

Cloudspectator. http://cloudspectator.com/. Accessed: 2015-09-05.

[4]

Dacapo benchmarks. http://www.dacapobench.org/. Accessed: 2015-09-05.

[5]

Google compute engine. https://cloud.google.com/compute/. Accessed: 2015-09-05.

[6]

Microsoft azure virtual machines. https://azure.microsoft.com/en-us/services/virtual-machines/. Accessed: 2015-09-05.

[7]

Profitbricks. https://www.profitbricks.com/. Accessed: 2015-09-05.

[8]

V. Abhishek, I. A. Kash, and P. Key. Fixed and market pricing for cloud services. arXiv preprint arXiv:1201.5621, 2012.

[9]

G. M. Amdahl. Validity of the single processor approach to achieving large scale computing capabilities. In Proceedings of the April 18--20, 1967, spring joint computer conference, pages 483--485. ACM, 1967.

Digital Library

[10]

J. Anselmi, D. Ardagna, J. Lui, A. Wierman, Y. Xu, and Z. Yang. The economics of the cloud: price competition and congestion. ACM SIGecom Exchanges, 13(1):58--63, 2014.

Digital Library

[11]

S. M. Blackburn, R. Garner, C. Hoffman, A. M. Khan, K. S. McKinley, R. Bentzur, A. Diwan, D. Feinberg, D. Frampton, S. Z. Guyer, M. Hirzel, A. Hosking, M. Jump, H. Lee, J. E. B. Moss, A. Phansalkar, D. Stefanović, T. VanDrunen, D. von Dincklage, and B. Wiedermann. The DaCapo benchmarks: Java benchmarking development and analysis. In OOPSLA '06: Proceedings of the 21st annual ACM SIGPLAN conference on Object-Oriented Programing, Systems, Languages, and Applications, pages 169--190, New York, NY, USA, Oct. 2006. ACM Press.

Digital Library

[12]

A. A. Chien and V. Karamcheti. Moore's law: The first ending and a new beginning. Computer, (12):48--53, 2013.

Digital Library

[13]

R. J. Deneckere and R. P. McAfee. Damaged goods. Journal of Economics & Management Strategy, 5(2):149--174, 1996.

[14]

Y. Feng, B. Li, and B. Li. Price competition in an oligopoly market with multiple iaas cloud providers. Computers, IEEE Transactions on, 63(1):59--73, 2014.

Digital Library

[15]

J. L. Gustafson. Reevaluating amdahl's law. Communications of the ACM, 31(5):532--533, 1988.

Digital Library

[16]

A. Li, X. Yang, S. Kandula, and M. Zhang. Cloudcmp: shopping for a cloud made easy. In Proceedings of the 2nd USENIX conference on Hot topics in cloud computing, pages 5--5. USENIX Association, 2010.

Digital Library

[17]

S. Marston, Z. Li, S. Bandyopadhyay, J. Zhang, and A. Ghalsasi. Cloud computing--the business perspective. Decision Support Systems, 51(1):176--189, 2011.

Digital Library

[18]

E. Maskin and J. Tirole. A theory of dynamic oligopoly, ii: Price competition, kinked demand curves, and edgeworth cycles. Econometrica: Journal of the Econometric Society, pages 571--599, 1988.

[19]

K. S. Moorthy. Product and price competition in a duopoly. Marketing Science, 7(2):141--168, 1988.

Digital Library

[20]

M. D. Noel. Edgeworth price cycles: Evidence from the toronto retail gasoline market*. The Journal of Industrial Economics, 55(1):69--92, 2007.

[21]

D. Nurmi, R. Wolski, C. Grzegorczyk, G. Obertelli, S. Soman, L. Youseff, and D. Zagorodnov. The eucalyptus open-source cloud-computing system. In Cluster Computing and the Grid, 2009. CCGRID'09. 9th IEEE/ACM International Symposium on, pages 124--131. IEEE, 2009.

Digital Library

[22]

Z. Ou, H. Zhuang, J. K. Nurminen, A. Yla-Jaaski, and P. Hui. Exploiting hardware heterogeneity within the same instance type of amazon ec2. In 4th USENIX Workshop on Hot Topics in Cloud Computing (HotCloud), 2012.

Digital Library

[23]

B. P. Rimal, E. Choi, and I. Lumb. A taxonomy and survey of cloud computing systems. In INC, IMS and IDC, 2009. NCM'09. Fifth International Joint Conference on, pages 44--51. Ieee, 2009.

Digital Library

[24]

J. Schad, J. Dittrich, and J.-A. Quiané-Ruiz. Runtime measurements in the cloud: observing, analyzing, and reducing variance. Proceedings of the VLDB Endowment, 3(1--2):460--471, 2010.

Digital Library

[25]

A. Shaked and J. Sutton. Relaxing price competition through product differentiation. The review of economic studies, pages 3--13, 1982.

[26]

G. Wang and T. E. Ng. The impact of virtualization on network performance of amazon ec2 data center. In INFOCOM, 2010 Proceedings IEEE, pages 1--9. IEEE, 2010.

Digital Library

[27]

H. Xu and B. Li. A study of pricing for cloud resources. ACM SIGMETRICS Performance Evaluation Review, 40(4):3--12, 2013.

Digital Library

Cited By

Maleh YSahid A(2024)Cloud Computing for Agile and Resilient OrganizationsNavigating IT Governance for Resilient Organizations10.4018/979-8-3693-3431-7.ch006(161-196)Online publication date: 16-Jul-2024
https://doi.org/10.4018/979-8-3693-3431-7.ch006
Gao JWang ZWei X(2024)An Adaptive Pricing Framework for Real-Time AI Model Service ExchangeIEEE Transactions on Network Science and Engineering10.1109/TNSE.2024.343291711:5(5114-5129)Online publication date: Sep-2024
https://doi.org/10.1109/TNSE.2024.3432917
Shingari NMago B(2024)The Importance of Data Encryption in Ensuring the Confidentiality and Security of Financial Records of Medical Health2024 IEEE International Conference on Interdisciplinary Approaches in Technology and Management for Social Innovation (IATMSI)10.1109/IATMSI60426.2024.10503174(1-6)Online publication date: 14-Mar-2024
https://doi.org/10.1109/IATMSI60426.2024.10503174
Show More Cited By

Index Terms

Competition on Price and Quality in Cloud Computing

Recommendations

Equilibrium Price Communication and Unadvertised Specials by Competing Supermarkets

This paper is concerned with how retailers, supermarkets in particular, communicate price discounts and use unadvertised specials. A common practice for supermarkets is to communicate price deals on some products through newspaper advertisements, while ...
Price Competition in a Channel Structure with a Common Retailer

In recent studies of channel competition, it has been found that channel intermediaries reduce the intensity of direct competition between manufacturers. The underlying channel structure in most studies consists of two manufacturers and two retailers ...
Pricing Under Dynamic Competition When Loyal Consumers Stockpile

Managers, let stockpiling be but at a higher price—don’t hope to cut stockpiling by lopping off promotions.

One goal of promotions for frequently purchased products is increasing short-term sales. Increases could be at competitors’ expense, coming from consumers with relatively weak brand preferences. However, increased sales from brand-loyal consumers could ...

Comments

Information & Contributors

Information

Published In

cover image ACM Other conferences

WWW '16: Proceedings of the 25th International Conference on World Wide Web

April 2016

1482 pages

ISBN:9781450341431

General Chairs:
Jacqueline Bourdeau
Tele-university (TELUQ), Montreal, QC, Canada
,
Jim A. Hendler
Rensselaer Polytechnic Institute, Troy, NY, USA
,
Roger Nkambou Nkambou
Université du Québec à Montréal, Montreal, QC, Canada
,
Program Chairs:
Ian Horrocks
University of Oxford, UK
,
Ben Y. Zhao
University of California at Santa Barbara, CA, USA

Copyright © 2016 Copyright is held by the International World Wide Web Conference Committee (IW3C2).

Sponsors

IW3C2: International World Wide Web Conference Committee

In-Cooperation

SIGWEB: ACM Special Interest Group on Hypertext, Hypermedia, and Web

Publisher

International World Wide Web Conferences Steering Committee

Republic and Canton of Geneva, Switzerland

Publication History

Published: 11 April 2016

Permissions

Request permissions for this article.

Request Permissions

Check for updates

Author Tags

Qualifiers

Research-article

Conference

WWW '16

Sponsor:

IW3C2

WWW '16: 25th International World Wide Web Conference

April 11 - 15, 2016

Québec, Montréal, Canada

Acceptance Rates

WWW '16 Paper Acceptance Rate 115 of 727 submissions, 16%;

Overall Acceptance Rate 1,899 of 8,196 submissions, 23%

Contributors

Other Metrics

View Article Metrics

Bibliometrics & Citations

Bibliometrics

Article Metrics

16
Total Citations
View Citations
403
Total Downloads

Downloads (Last 12 months)23
Downloads (Last 6 weeks)3

Reflects downloads up to 01 Jan 2025

Other Metrics

View Author Metrics

Citations

Cited By

Maleh YSahid A(2024)Cloud Computing for Agile and Resilient OrganizationsNavigating IT Governance for Resilient Organizations10.4018/979-8-3693-3431-7.ch006(161-196)Online publication date: 16-Jul-2024
https://doi.org/10.4018/979-8-3693-3431-7.ch006
Gao JWang ZWei X(2024)An Adaptive Pricing Framework for Real-Time AI Model Service ExchangeIEEE Transactions on Network Science and Engineering10.1109/TNSE.2024.343291711:5(5114-5129)Online publication date: Sep-2024
https://doi.org/10.1109/TNSE.2024.3432917
Shingari NMago B(2024)The Importance of Data Encryption in Ensuring the Confidentiality and Security of Financial Records of Medical Health2024 IEEE International Conference on Interdisciplinary Approaches in Technology and Management for Social Innovation (IATMSI)10.1109/IATMSI60426.2024.10503174(1-6)Online publication date: 14-Mar-2024
https://doi.org/10.1109/IATMSI60426.2024.10503174
Jin CPeng SWang P(2023)Sticky Consumers and Cloud WelfareSSRN Electronic Journal10.2139/ssrn.4573326Online publication date: 2023
https://doi.org/10.2139/ssrn.4573326
Wei HGuan YZhao QZhang TLiu JZhang H(2023)A Novel Distributed Computing Resource Operation Mechanism for Edge Computing2023 9th International Conference on Computer and Communications (ICCC)10.1109/ICCC59590.2023.10507521(2593-2598)Online publication date: 8-Dec-2023
https://doi.org/10.1109/ICCC59590.2023.10507521
Hummel PSchwarz MPennock DSegal ISeuken S(2022)Efficient Capacity Provisioning for Firms with Multiple Locations: The Case of the Public CloudProceedings of the 23rd ACM Conference on Economics and Computation10.1145/3490486.3538281(1018-1039)Online publication date: 12-Jul-2022
https://dl.acm.org/doi/10.1145/3490486.3538281
Boodaghians SFusco FLeonardi SMansour YMehta R(2022)Online revenue maximization for server pricingAutonomous Agents and Multi-Agent Systems10.1007/s10458-022-09544-y36:1Online publication date: 22-Jan-2022
https://doi.org/10.1007/s10458-022-09544-y
Selvacoumar ASoobhany AReji B(2022)P2PRC—A Peer-To-Peer Network Designed for ComputationProceedings of International Conference on Information Technology and Applications10.1007/978-981-16-7618-5_45(517-526)Online publication date: 21-Apr-2022
https://doi.org/10.1007/978-981-16-7618-5_45
Bose ASarkar PPremananda J(2022)Futuristic Cloud Market—Game Theoretic EquilibriumProceedings of International Conference on Industrial Instrumentation and Control10.1007/978-981-16-7011-4_44(465-473)Online publication date: 15-Feb-2022
https://doi.org/10.1007/978-981-16-7011-4_44
Wu CBuyya RRamamohanarao K(2019)Modeling cloud business customers’ utility functionsFuture Generation Computer Systems10.1016/j.future.2019.12.044Online publication date: Dec-2019
https://doi.org/10.1016/j.future.2019.12.044
Show More Cited By

View Options

Login options

Check if you have access through your login credentials or your institution to get full access on this article.

Full Access

Get this Publication

View options

PDF

View or Download as a PDF file.

eReader

View online with eReader.

Media

Figures

Other

Tables

View Table of Contents