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\chapter{Economics}

\begin{definition}[Trade]
A trade agreement is a bilateral promise to exchange goods of value.
Trade is instantaneous. Goods are money.
\end{definition}

A principle of trade is that traded promise bundles can be decoupled
using money. i.e. if we trade gold for textiles, one can decouple these
movements of goods simply by paying their equivalent value.

\begin{definition}[Peering agreement]
A bilateral commitment between two parties (peers) to serve one another 
with possibly different services without the exchange of money.
\end{definition}


\begin{definition}[Paid service agreement]
Agreements are usually a commitment to serve, and a promise to pay.
\end{definition}




\section{Contract Economics}

There is a lot of economic theory about contracts, but it seems
relatively new and no one is completely certain about it... still, some
interesting things here.

The models seem to lack the symmetry of promises, and so promises have
an advantage over them for generality. The talk about commitments and
``effort'' however..


\subsection{Principal-agent model}

A model that gets mentioned a lot is this one. It is about one
``agent'' controlling another.

Principal is someone who wants to employ an agent to perform a service
over which he does not fully have control. The principal
(manufacturer) hires the agent to sell its product for instance.

For instance, a distrbution agent might advertise less than they are
conracted to do in order to {\em free-ride} off the manufacturer's
reputation.  These principal-agent problems are often dealt with by
``vertical restrictions'' such as forbidding agents to change the
price of goods. Courts have been uneasy about these kinds of contracts
since they seem to oppose competition.

Forbidding this has little effect, since comapnies can simplt
integrate vertically and handle their own distribution.

The profit maximization hypothesis says that all firms/agents should
try to maximize profit.  If they don't it is explained only by bad
management.

\subsection{Incomplete contracts}

People are starting to realize there are things that are beyond their control.
However, the models believe that this is because companies think it is too
expensive to control everything...




\section{The concept of a service -- Emanics notes}


Services are about committing to behaviour that is valuable to a
client.  We can use promise theory to define this in terms of
interactions between a number of agents. Agents are initially peers
that have no predecided roles. It is useful to begin with general
definitions that can be specialized to the view of network services
later.

\subsection{Client-server conundrum}

\begin{definition}[Server (service provider)] 
Is any agent $S$ that makes a commitment to one or more external agents.
\end{definition}

\begin{definition}[Service user] 
Any agent that makes
a promise to use/accept a service.
\end{definition}

Usually in agent interaction, a given agent plays the role of service
provider and service user.  In fact there is no way to distinguish a
unique asymmetry in such relationships.

We might try to argue the a client is someone who pays for a service, while
the service provider is the recipient of payment, but this is not true
in general either.

\begin{itemize}
\item Consider someone employing the service of an insurance company.
The insurance company can end up paying the client more than the client
pays it.

\item A service provider can pay a user to use its service in order to
gain capital of a difference kind.

\item In a peering agreement neigher party pays the other.
\end{itemize}
In short, one cannot always judge who is the service provider by looking
at promises.



\subsection{SLA,SLO,....}

\begin{definition}[SERVICE AGREEMENT]
 is a binding agreement between
a service provider and a client
\end{definition}

\begin{definition}[SERVICE LEVEL AGREEMENT]
 is a subset of SERVICE AGREEMENT
which concerns the scope of the commitment made by the service provider
and the scope of the promise to use the service by the client.
\end{definition}

\section{Outsourcing}

Outsouring is about removing dependencies between agents. It is
a way of eliminating the responsibility of separate tasks.