Title: Cloud Pricing: The Spot Market Strikes Back
Abstract: In this talk, we present the results of our paper 'Cloud Pricing: The Spot Market Strikes Back'. This is a conference practice talk.
Cloud computing providers must constantly hold many idle compute instances available (e.g., for maintenance,
or for users with long-term contracts). A natural idea to increase the provider’s profit is to sell these idle
instances on a spot market where users can be preempted. However, this ignores the possible “market
cannibalization” that may occur in equilibrium. In particular, users who would generate more profit in the
provider’s existing fixed-price market might move to the spot market and generate less profit. In this paper,
we model the provider’s profit optimization problem using queuing theory and game theory and analyze the
equilibria of the resulting queuing system. Our main result is an easy-to-check condition under which offering
a market consisting of fixed-price instances as well as some spot instances (using idle resources) increases the
provider’s profit over offering only fixed-price instances. Furthermore, we show that under our condition,
such a profit increase can always be combined with a Pareto improvement for the users. Finally, we illustrate
our results numerically to demonstrate the effects the provider’s costs and her strategy have on her profit.