Interaction, Competition and Innovation in a Service-Oriented Internet: An Economic Model

This paper presents a new economic approach for studying competition and innovation in a complex and highly interactive system of network providers, users, and suppliers of digital goods and services (i.e., service providers). It employs Cournot and Bertrand games to model the competition among service providers and among network providers, respectively, and develops a novel unified model to capture the interaction and competition among these players in a "Service-oriented" Internet. Incentives for service and network innovation are studied in this model.