Strategic network formation through peering and service agreements

► We introduce a game theoretic model of network formation to understand the system of business relationships between various Internet entities. ► We incorporate some of the qualities of Internet business relationships, including customer-provider and peering contracts. ► We show that every Nash equilibrium can be represented by a circulation flow of utility with certain constraints. ► This allows us to prove bounds on the prices of anarchy and stability. ► We also focus on the quality of equilibria achievable through centralized incentives.