A design of anautomatic network capacity markets, oftenreferred to as a bandwidth market, is presented. Three topicsare investigated. First, a network model is proposed. Theproposed model is based upon a trisection of the participantroles into network users, network owners, and market middlemen.The network capacity is defined in a way that allows it to betraded, and to have a well defined price. The network devicesare modeled as core nodes, access nodes, and border nodes.Requirements on these are given. It is shown how theirfunctionalities can be implemented in a network. Second, asimulated capacity market is presented, and a statisticalmethod for estimating the price dynamics in the market isproposed. A method for pricing network services based on sharedcapacity is proposed, in which the price of a service isequivalent to that of a financial derivative contract on anumber of simple capacity shares.Third, protocols for theinteraction between the participants are proposed. The marketparticipants need to commit to contracts with an auditableprotocol with a small overhead. The proposed protocol is basedon a public key infrastructure and on known protocols for multiparty contract signing. The proposed model allows networkcapacity to be traded in a manner that utilizes the networkeciently. A new feature of this market model, compared to othernetwork capacity markets, is that the prices are not controlledby the network owners. It is the end-users who, by middlemen,trade capacity among each-other. Therefore, financial, ratherthan control theoretic, methods are used for the pricing ofcapacity. <b>Keywords:</b>Computer network architecture, bandwidthtrading, inter-domain Quality-of-Service, pricing,combinatorial allocation, financial derivative pricing,stochastic modeling

<p>A design of anautomatic network capacity markets, oftenreferred to as a bandwidth market, is presented. Three topicsare investigated. First, a network model is proposed. Theproposed model is based upon a trisection of the participantroles into network users, network owners, and market middlemen.The network capacity is defined in a way that allows it to betraded, and to have a well defined price. The network devicesare modeled as core nodes, access nodes, and border nodes.Requirements on these are given. It is shown how theirfunctionalities can be implemented in a network. Second, asimulated capacity market is presented, and a statisticalmethod for estimating the price dynamics in the market isproposed. A method for pricing network services based on sharedcapacity is proposed, in which the price of a service isequivalent to that of a financial derivative contract on anumber of simple capacity shares.Third, protocols for theinteraction between the participants are proposed. The marketparticipants need to commit to contracts with an auditableprotocol with a small overhead. The proposed protocol is basedon a public key infrastructure and on known protocols for multiparty contract signing. The proposed model allows networkcapacity to be traded in a manner that utilizes the networkeciently. A new feature of this market model, compared to othernetwork capacity markets, is that the prices are not controlledby the network owners. It is the end-users who, by middlemen,trade capacity among each-other. Therefore, financial, ratherthan control theoretic, methods are used for the pricing ofcapacity.</p><p><b>Keywords:</b>Computer network architecture, bandwidthtrading, inter-domain Quality-of-Service, pricing,combinatorial allocation, financial derivative pricing,stochastic modeling</p>