Peer-to-Peer Communication Networks: Understanding the Bucket Brigade

Title: Peer-to-Peer Communication Networks: Understanding the Bucket Brigade

Research Question: How can we manage the trade-off between direct and indirect network externalities in peer-to-peer (P2P) communication networks?

Methodology: The study uses economic analysis and mathematical modeling to examine the pricing of transit traffic in wireless P2P networks. It employs the concepts of direct and indirect network externalities to understand the impact of membership growth on the network's value.

Results: The research finds that without any pricing mechanism, congestion externalities overwhelm other network effects in a wireless data network. This leads to a free-rider problem, where users take advantage of others' resources without contributing their own. With pricing and perfect competition, a peering equilibrium is possible, allowing more users on the network at the same time. However, the congestion externality still poses a problem, so organizing peering through a club may be the best solution.

Implications: The study suggests that pricing mechanisms and perfect competition can help manage the trade-off between direct and indirect network externalities in P2P networks. It also highlights the importance of organizing peering through a club to mitigate the congestion externality. This research has significant implications for the design and management of P2P networks, as well as for understanding the dynamics of network effects in general.

Link to Article: https://arxiv.org/abs/0109081v2 Authors: arXiv ID: 0109081v2