An auction mechanism for allocating the bandwidth of networks to their users

We present a mechanism for auctioning bandwidth on a network-wide basis to end users or ISPs that will utilize it for the same time period. This mechanism consists of a set of simultaneous multi-unit descending-price (i.e. Dutch) auctions, one per link of the network. The per unit prices of bandwidth at the various links are asymmetric, thus reflecting the asymmetry of demand for these links. A user can be instantly allocated bandwidth over a certain path, by simultaneously bidding for the quantity desired at all relevant auctions. This winner determination rule is complemented by a payment rule of the VCG (Vickrey–Clarke–Groves) type, which provides users with the incentive to bid truthfully, thus simplifying bidding. Also, the mechanism enables the auctioneer to use his prior information on market demand anticipated and its spreading among the various links in order to set effectively the auction’s parameters. We argue that our mechanism attains nearly efficient allocation of the network’s bandwidth (i.e. the resulting social welfare is close to the respective maximum for the quantity decided to be sold by the auctioneer), while it is simple, scalable and applicable to real networks, even for auctioning the capacity of links owned by multiple providers and then splitting the revenue among them. Alternatively, the mechanism offers the provider the opportunity to optimize his revenue, rather than the social welfare. Since our mechanism’s computational complexity is low it can serve as a fast, practical, and near-optimal solution to a generally NP-hard optimization problem.