Contract Design for Composed Services in a Cloud Computing Environment

  • Sonja BrangewitzEmail author
  • Claus-Jochen Haake
  • Jochen Manegold
Conference paper
Part of the Communications in Computer and Information Science book series (CCIS, volume 508)


In this paper, we study markets in which sellers and buyers interact with each other via an intermediary. Our motivating example is a market with a cloud infrastructure where single services are flexibly combined to composed services. We address the contract design problem of an intermediary to purchase complementary single services. By using a non-cooperative game-theoretic model, we analyze the incentives for high- and low-quality composed services to be an equilibrium outcome of the market. It turns out that equilibria with low quality can be obtained in the short run and in the long run, whereas those with high quality can only be achieved in the long run. In our analysis we explicitly determine the according discount factors needed in an infinitely repeated game. Furthermore, we derive optimal contracts for the supply of high- and low-quality composed services.


Composed services Contract design Cloud computing Service quality Asymmetric information Repeated games 

Supplementary material


  1. 1.
    Asker, J., Cantillon, E.: Procurement when price and quality matter. RAND J. Econ. 41(1), 1–34 (2010)CrossRefGoogle Scholar
  2. 2.
    Baker, G., Gibbons, R., Murphy, K.J.: Subjective performance measures in optimal incentive contracts. Q. J. Econ. 109(4), 1125–1156 (1994)CrossRefzbMATHGoogle Scholar
  3. 3.
    Brangewitz, S., Jungmann, A., Petrlic, R., Platenius, M.C.: Towards a flexible and privacy-preserving reputation system for markets of composed services. In: Proceedings of the Sixth International Conferences on Advanced Service Computing (SERVICE COMPUTATION), pp. 49–57 (2014)Google Scholar
  4. 4.
    Buyya, R., Yeo, C.S., Venugopal, S., Broberg, J., Brandic, I.: Cloud computing and emerging IT platforms: Vision, hype, and reality for delivering computing as the 5th utility. Future Gener. Comput. Syst. 25(6), 599–616 (2009)CrossRefGoogle Scholar
  5. 5.
    Dana, J.D.J., Fong, Y.F.: Product quality, reputation, and market structure. Int. Econ. Rev. 52(4), 1059–1076 (2011)CrossRefMathSciNetGoogle Scholar
  6. 6.
    Dana Jr., J.D.: Monopoly price dispersion under demand uncertainty. Int. Econ. Rev. 42(3), 649–670 (2001)CrossRefMathSciNetGoogle Scholar
  7. 7.
    Dellarocas, C.: Reputation mechanism design in online trading environments with pure moral hazard. Inf. Syst. Res. 16(2), 209–230 (2005)CrossRefGoogle Scholar
  8. 8.
    Giovanoli, C., Pulikal, P., Gatziu Grivas, S.: E-marketplace for cloud services. In: CLOUD COMPUTING 2014, The Fifth International Conference on Cloud Computing, GRIDs, and Virtualization, pp. 76–83 (2014)Google Scholar
  9. 9.
    Happe, M., Kling, P., Plessl, C., Platzner, M., Meyer auf der Heide, F.: On-the-fly computing: A novel paradigm for individualized it services. In: Proceedings of the 9th Workshop on Software Technology for Future embedded and Ubiquitous Systems (SEUS) (2013)Google Scholar
  10. 10.
    Jula, A., Sundararajan, E., Othman, Z.: Cloud computing service composition: a systematic literature review. Expert Syst. Appl. 41(8), 3809–3824 (2014)CrossRefGoogle Scholar
  11. 11.
    Laussel, D., Long, N.V.: Strategic separation from suppliers of complementary inputs: a dynamic markovian approach. In: Working Paper No. 2011s–41, Centre interuniversitaire de recherche en analyse des organisations (CIRANO), April 2011Google Scholar
  12. 12.
    Mailath, G.J., Samuelson, L.: Repeated Games and Reputations: Long-Run Relationships. Oxford University Press, Oxford (2006)CrossRefGoogle Scholar
  13. 13.
    Nash, J.: Non-cooperative games. Ann. Math. 54(2), 286–295 (1951)CrossRefzbMATHMathSciNetGoogle Scholar
  14. 14.
    Selten, R.: Spieltheoretische Behandlung eines Oligopolmodells mit Nachfrageträgheit: Teil I: Bestimmung des dynamischen Preisgleichgewichts. Zeitschrift für die gesamte Staatswissenschaft 121(2), 301–324 (1965)Google Scholar
  15. 15.
    Selten, R.: Spieltheoretische Behandlung eines Oligopolmodells mit Nachfrageträgheit: Teil II: Eigenschaften des dynamischen Preisgleichgewichts. Zeitschrift für die gesamte Staatswissenschaft 121(4), 667–689 (1965)Google Scholar
  16. 16.
    Shapiro, C.: Premiums for high quality products as returns to reputations. Q. J. Econ. 98(4), 659–680 (1983)CrossRefGoogle Scholar
  17. 17.
    Sundareswaran, S., Squicciarini, A., Lin, D.: A brokerage-based approach for cloud service selection. In: 2012 IEEE 5th International Conference on Cloud Computing (CLOUD), pp. 558–565, June 2012Google Scholar
  18. 18.
    Tang, Q.C., Cheng, H.K.: Optimal location and pricing of web services intermediary. Decis. Support Syst. 40(1), 129–141 (2005)CrossRefMathSciNetGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2015

Authors and Affiliations

  • Sonja Brangewitz
    • 1
    Email author
  • Claus-Jochen Haake
    • 1
  • Jochen Manegold
    • 1
  1. 1.Department of EconomicsUniversity of PaderbornPaderbornGermany

Personalised recommendations