Service Pricing Decision in Cyber-Physical Systems: Insights from Game Theory

In cyber-physical systems (CPS), service organizers (SOs) aim to collect service from service entities at lower price and provide better combined services to users. However, each entity receives payoffs when providing services, which leads to competition between SOs and service entities or within internal service entities. In this paper, we first formulate the price competition model of SOs where the SOs dynamically increase and decrease their service prices periodically according to the number of collected services from entities. A game based services price decision (GSPD) model which depicts the process of price decisions is proposed in this paper. In the GSPD model, entities game with other entities under the rule of "survival of the fittest" and calculate payoffs according to their own payoff-matrix, which leads to a Pareto-optimal equilibrium point. Numerous experiments demonstrate that the GSPD model can explain the price dynamics in the real world, and also can help decision makers a lot under various scenarios.