Optimal contract design under asymmetric information for cloud-enabled internet of controlled things

The development of advanced wireless communication technologies and smart embedded control devices makes everything connected, leading to an emerging paradigm of the Internet of Controlled Things (IoCT). IoCT consists of two layers of systems: cyber layer and physical layer. This work aims to establish a holistic framework that integrates the cyber-physical layers of the IoCT through the lens of contract theory. For the cyber layer, we use a FlipIt game to capture the cloud security. We focus on two types of cloud, high-type and low-type, in terms of their provided quality of service (QoS). The cloud’s type is of private information which is unknown to the contract maker. Therefore, the control system administrator (CSA) at the physical layer needs to design a menu of two contracts for each type of service provider (SP) due to this asymmetric information structure. According to the received contract, SP decides his cyber defense strategy in the FlipIt game of which the Nash equilibrium determines the QoS of the cloud, and further influences the physical system performance. The objective of CSA is to minimize the payment to the cloud SP and the control cost jointly by designing optimal contracts. Due to the interdependence between the cyber and physical layers in the cloud-enabled IoCT, we need to address the cloud security and contract design problems in an integrative manner. We find that CSA always requires the best QoS from two types of cloud. In addition, under the optimal contracts, the utilities of both SPs are constants. Furthermore, no contracts will be offered to the cloud if the resulting service cannot stabilize the physical system.