Profit Sharing Contracts between Content and Service Providers for Enhanced Network Quality

It has been a long demand of Internet Service Providers (ISPs) that the Content Providers (CPs) share their profits for investments in network infrastructure. In this paper, we study profit sharing contracts between a CP with multiple ISPs. Each ISP commits to improving the Quality of Service (QoS) for the end-users through higher investments efforts. The CP agrees to share the profits due to the resulting higher demand for its content. We first model non-cooperative interaction between the CP and the ISPs as a two-stage Stackelberg game. CP is the leader that decides what fraction of its profits will be shared with the ISPs. Each ISP then simultaneously decides the amount of effort (investment) to enhance network quality. Here, CP cannot observe individual effort by the ISPs, which poses a challenge for the CP to decide how to share the profits with each ISP. Therefore, we also investigate a cooperative scenario, where the CP only decides the total share it gives to the ISPs, and each ISP then cooperatively shares the profit among themselves. We study the effect of such cooperation between the ISPs by building a Nash Bargaining based model. We show that the collaboration improves total effort by the ISPs and the payoff of the CP.