Abstract: Service overlay network (SON) is a virtual service network built on underlying network. It purchases resource from the underlying network and provides cross-domain and QoS sensitive value-added services to gain profits. Resource pricing is thus a key problem for the SON operator. This paper is devoted to the study of the problem of resource pricing with elastic demand based on game theory. After giving a SON architecture, the pricing problem was formulated in a bilevel programming model taking the effect of congestion and QoS on objective into consideration. The upper level model aims to maximize the difference between the revenues and the cost of the whole SON system, while the lower level model is a Wardrop user equilibrium model with elastic demand. A heuristic solution algorithm based on the trial-and-error procedure and difference sensitivity analysis method is designed for the proposed bilevel programming model when precise link congestion metric function and demand function are unknown. Numerical examples are also performed to illustrate the convergence and effectiveness of the bilevel programming model.

Key words: service overlay networks, games theory, QoS, resource pricing, Wardrop user equilibrium