Journal
MANAGEMENT SCIENCE
Volume 68, Issue 1, Pages 105-122Publisher
INFORMS
DOI: 10.1287/mnsc.2020.3907
Keywords
cloud computing; queuing theory; game theory; profit optimization; market design
Funding
- Microsoft Research [2015-058]
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This study analyzes the viability of offering a spot market in cloud computing by combining queueing theory and game theory. The findings show that a provider can achieve a profit increase and create a Pareto improvement for users by offering a spot market alongside a fixed-price market.
Cloud computing providers must constantly hold many idle compute instances available (e.g., for maintenance or for users with long-term contracts). A natural idea, which should intuitively increase the provider's profit, is to sell these idle instances on a secondary market, for example, via a preemptible spot market. However, this ignores possible market cannibalization effects that may occur in equilibrium as well as the additional costs the provider experiences due to preemptions. To study the viability of offering a spot market, we model the provider's profit optimization problem by combining queuing theory and game theory to analyze the equilibria of the resulting queuing system. Our main result is an easy-to-check condition under which a provider can simultaneously achieve a profit increase and create a Pareto improvement for the users by offering a spot market (using idle resources) alongside a fixed-price market. Finally, we illustrate our results numerically to demonstrate the effects that the provider's costs and her strategy have on her profit.
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