Rajan Mathew Lukose

Social Dilemmas and Internet Congestion

Since the Internet is a public good and its numerous users are not charged in proportion to their use, it appears rational for individuals to consume bandwidth greedily while thinking that their actions have little effect on the overall performance of the Internet. Because every individual can reason this way, the whole Internets performance can degrade considerably, making everyone worse off. An analysis of the congestions created by such dilemmas predicts that they are intermittent in nature with definite statistical properties, leading to short-lived spikes in congestion. Experiments in which we measured Internet latencies over a wide range of conditions and locations confirm these predictions, thus providing a possible microscopic mechanism for the observed intermittent congestions of the Internet.

Surfing as a real option

One of the predominant modes of accessing information in the World Wide Web consists in surfing from one document to another along hypermedia links. We have studied the dynamics of Web surfing within an economics context by considering that there is value in each page that an individual visits, and that clicking on the next page assumes that the information will continue to have some value. Within this formulation an individual will continue to surf until the expected cost of continuing is perceived to be larger than the expected value of the information to be found in the future. This problem is similar to that of a real option in financial economics. We consider the options viewpoint as a descriptive theory of information foraging by Internet users, and we show how it leads to a kind of “law of surfing” which has been verified experimentally in several large independent datasets. But the real options perspective, which is by now a well-established field in financial economics, may also provide a rich normative model for designing rational Internet agents.

A methodology for managing risk in electronic transactions over the Internet

The explosive growth of the Internet has made possible an economic transformation in which commerce will become largely electronic. In this vision, the medium of communication and negotiation becomes a distributed network of computers equipped with robust, secure and trusted “cash” mechanisms. It is thus of paramount importance to design mechanisms that will ensure timely and reliable transactions in cyberspace. In this paper we present a methodology for quantitatively managing the risk and cost of executing transactions in a distributed network environment by exploiting an analogy with modern financial portfolio theory. We illustrate the methodology with several concrete examples under different pricing schemes, as well as with empirical measurements of Internet traffic.