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The Tragedy of the Commons
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En provenance du cours de Princeton University
Networks Illustrated: Principles without Calculus
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À partir de la leçon
Pricing Data
Data makes up a significant part of our cell phone bills. How do cellular providers set these price points? In this lesson, we will see how so-called usage-based pricing schemes can send better signals than flat- rate, “buffet” schemes, leading to better sharing of the network.
Rencontrer les enseignants
Christopher BrintonLecturer
Electrical Engineering
Mung ChiangProfessor
Electrical Engineering
So there's a couple different ways to envision the advantages of usage based
over flat rate pricing. And we'll look at a few of them now
starting with this trademark example of kind of the fallacy of flat rate pricing.
And it's called The Tragedy Of The Commons.
And what we'll look at, it has a, it ties into a lot of other fields as well.
The main themes are very much portable. So the first thing to notice is that the,
under flat-rates the demand is different than under usage-based pricing.
And really the reason for that is, the pricing signal looks like it's free.
You know, after you pay your initial, your initial fee for the month, you get
unlimited whatever you want. And, you know, that's not very efficient,
because then you're going to want to consume just as much as you want.
And so, in in 1968 we, we site this example, it's by Garrett Hardin and it's
called "The Tragedy of the Commons". And the commons is in this example a
pasture of land. And we'll see how that ties into
networking in a minute, but basically the idea is that we have some cattle and some
herdsmen, right So these are herdsmen over here and these
are cattle right, they have one each right now.
And each of the herdsmen is driven by self-interest and their own interest is
to they want to feed as many animals as they can.
Right, and so that they can feed their animals and graze them and then you know,
sell their animals at the end. And so the question that they ask first
is, should I add another animal to my herd or not?
And that's really. Every, every second that's just consider
this example just a rational herdsman driven by self-interest wants to maximize
his own gain. And he asks himself, should I add another
animal to my herd or should I not? And so let's, let's think about this for
a minute. if we have this one herdsman right here.
And this herdsman says, okay well, what's the, what's the gain?
What's the benefit of adding a heard. Well, I'm going to get, really, kind of a
plus one. Right?
Because I get one more cattle on to my land.
Right? So, if he adds one more cattle, he gets a
plus one. Now the downside of that is that the
pasture is finite, so every piece of cattle you add is going to take more out
of the harvest, or out of the land. Right but what's interesting is that
really he doesn't have to bear all that burden, right, because it's kind of
something that's shared over everyone or every herdsman, right?
So that's that minus effective and the cattle really is shared and divided over
every herdsman. So if there were two herdsmen in this
case, it'll be minus one half. Right?
If there were 10 herdsmen it would be minus 1/10th off of his total score, and
so on. so basically, let's say there's 10
herdsmen, so it's minus 1/10th. Right?
'Cuz there's more than one and so, the benefit that he gets is plus 1 and the,
the the downside, just to him, just by his own self-interest is minus 1/10th.
Right, so if you add those together, you're going to get nine-tenths, which is
positive, right. So, by this logic he should add another
cattle, right, and another one. And another one, and another one, and
every herdsman is following this process as well.
And eventually it gets to the point where you have a lot of herdsmen, and each
herdsman has added a ton of cattle. Right, then the problem is that, you
know, there's going to be no more land left to graze.
The entire parcel of land is going to be over grazed and it's going to deplete and
then, the pasture is ruined. And so, really what has happened here is
that, with each of these herdsmen, these four herdsmen here in this example,
driven by self-interest, right. Where they're only looking at themselves
and maximizing their own gain and, they, they, they see to themselves.
And [INAUDIBLE] to go up and say yeah, it's better actually adding cattle right
now, and another cattle, and another cattle.
And then they get to overgrazing and pasture becomes ruined but in the end
they all lose, because all of their livestock will die.
'Cuz they don't have anything to feed off of.
Right? So that's the tragedy of the commons.
So now, that's great but you're probably wondering well, how does that have
anything to do with networking. How do cattle and pastures of land have
anything to do with networking. Well, really, the flat-rate pricing kind
of creates a tragedy of the commons, right.
And the commons here is the internet, right.
So rather than the commons being a parcel of the land, the commons now is the
internet so just look at it in that case, right.
It's a network that we're all trying to share.
Okay, so, basically what ends up happening is now we'll consider each of
our phones are really these herdsmen and the cattle are kind of what we're taking
out from the network, right. So each of our cattle, or each of our
applications are going to take something away from the network.
So, under flat rate pricing, you remember, it's really just a one way
arrow. Right, so we take from the network.
And we don't really have any added cost. I mean we could think well, you know
everything I'm doing is going to add a little congestion, but still that's only
just tiny, tiny little, little cost. It's split over all the devices, so it's
really, really small and we get much more gain just by taking as much data as we
possibly can. And running up our demands curve, the
demand curves as high as they can go. What happens is that causes the network
itself to becomes congested. 'Cuz it can't handle all that demand and
it needs to upgrade its infrastructure, right.
So what ends up happening is the ISP has to charge more and more in order to
recover its cost. Right?
Because it can't support all that added demand 'cause it needs to, it only has a
certain amount of supply. it only has a certain amount of supply
per dollar. So it needs to charge more dollars in
order to be able to continue supply to match the demand.
So, say it was now, it was originally $30 due to pay at the beginning of the month.
And that moved up to $40 now. And then we keep going up, and up, and
up, and up, and more and so that the network could avoid buckling under
congestion. You'd have to keep charging more and
more. And this is an example actually of what's
called the negative network effect. And this is a recurring theme throughout
networking. It's the first time we've seen it come up
in this context. It's it's many times in the [INAUDIBLE]
for this book, there's many chapters that talk about the negative network effect.
And, really the idea here is that, everyone is driven by their own self
interests. Right?
And, that creates this thing called the "tragedy of the commons", right?
And, basically the network effect is that everyone kind of sees their own self gain
and their own self interest in taken from the network.
But what happens is they all end up collectively driving themselves to ruin.
Right? 'Cuz they're driven by their own self
interests, right? so that's the idea behind the negative
network effect. And so, really the way that we mitigate
this and we need a way, obviously, to mitigate this, is by getting a better
pricing signal. Right?
We need, we need one in which now, let's go back to terminology in chapter one.
Remember I said that we were going to see some terms here that we saw in chapter
one? we want everybody to build the
internalize, the negative externalities that they're imposing on the network.
So, every cellphone, just by virtue of the fact that it's taking demand and data
from the network is imposing a negative externality on the network.
Here, that negative externality is in terms of congestion.
Back in Chapter 1, the negative externality was in terms of interference.
Still the same idea just a different form of externality.
Okay? The way that we have and internalize that
negative externality here is by making them pay money.
So, every time they take data they have to pay some money so, we close this loop.
And we put these dollar signs here basically saying, if you want to take
some data out, some gigabytes, you gotta pay.
Every gigabyte you take, so here's the gigabyte coming, you gotta pay some
money, to the network. So, remember back in Chapter 1 we saw
power control being the way that that was going to happen, right.
so you had to follow a power control algorithm and get your power down to a
certain level, so that everyone else could operate under the same conditions
as you. And in this case our signal here is this
money. Right.
So how much money? They'd be forcing you to sit on your
demand curve, rather than going above your demand curve, violating it, because
it's not in your best interest to do so. And again, we're creating a negative
feedback loop, here. We talk about negative feedback remember
the in Chapter 1 is a signal to interference ratio that was being
feedback to each of the transmitters. Here it's a, the, the feedback is in the
form of the price that the cellphones have to pay, right, for using the data if
they do. And that's the price they have to pay for
being in the network in the first place. And you know, that's a really, really
good analogies here to cellular power control.
All we did in Chapter 1 it's really kind of portable ideas, the idea of negative
externalities. First of all negative externalities
meaning what damage could a device impose to the network by being there, in fact
they have to internalize them. negative feedback loop, that how we
correct and we, that's, negative feedback loop is the means by which we force them
to internalize their negative externalities.
And negative network effect here just being the fact that we're, we're
collectively driving ourselves to an undesirable scenario by having more
congestion. Even though it appears that we're
operating in our own self interest.
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