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  • https://doi.org/10.21203/rs.3.rs-7927931/v1Copy DOI Icon

A Machine Learning-Enabled IoT Service Pricing Model Integrating Quality Optimization and Duopoly Cournot Dynamics

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Abstract

<title>Abstract</title> The Internet of Things (IoT) services have seen rapid growth in recent years. However, existing research has yet to propose a robust method for quantitatively evaluating IoT services, nor has it adequately addressed the impact of cooperation and competition among IoT service providers on pricing strategies. This paper develops a duopolistic Cournot competition model involving data providers, service providers, and consumers. IoT service providers leverage machine learning to train models that generate user-centric IoT services, which they can then market and monetize for profit. We introduce a Logistic-curved service-quality function, with the amount of data used for machine learning as the primary metric for IoT service quality. The competitive behavior between IoT service providers in a Cournot duopoly market is examined, and we derive the optimal IoT service pricing and data procurement strategies that maximize profits for both parties. Next, we explore the possibility of bundling IoT services at discounted prices, categorizing four distinct scenarios based on the relationship between service quality and pricing. We calculate the pricing of IoT service bundles and determine the optimal data purchase quantities for both providers to maximize their profits. Finally, we incorporate a price-fluctuation factor to account for market uncertainty, refining the profit-function model to better reflect real-world market dynamics. The research can provide decision-making references for IoT service pricing, and the pricing mechanism based on machine learning can effectively mitigate the biases caused by price fluctuations.

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