Chapter 4

Internet Economics of Distributed Systems

Hans W. Gottinger

Abstract

We focus on economic management of web services in distributed multimedia systems. We dig deeper into mechanism design approaches tracing them back to classical economic mechanisms of market designs and information economics which I refer to as Hayek-Hurwicz mechanism design – due to Austrian-British economist F.A. Hayek and American economist L. Hurwicz. The basic idea of market agents as computationally efficient human agents induced by incentive compatability and selfishness have been rediscovered and reapplied in rigorous methodological form by computer scientists merging algorithmic game theory, computability and network complexity. Distributed algorithmic mechanism design (DAMD) for internet resource allocation indistributed systems is akin to an equilibrium converging market based economy where selfish agents maximize utility and firms seek to maximize profits and the state keeps an economic order providing basic public goods and public safety.A distributed algorithmic mechanism design thus consists of three components: a feasible strategy space at the network nodes for each agent or autonomous system, an aggregated outcome function computed by the mechanism and a set of multi-agent prescribed strategies induced by the mechanism. A distributed algorithmic mechanism design being computationally efficient in a large decentralized Internet economy is a powerful paradigm to substantiate claims by Hayek (1945) that an industrialized economy based on market principles has an overall better output and growth performance (static and ynamic) than socialist type economies of a similar nature and scale. Best economic coordination through markets producing maximal social welfare is supported by computational efficiency in computer science. Applications relate to a data management economy.

Total Pages: 75-92 (18)

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