Competition and regulation in a wireless operator market: An evolutionary game perspective

Abstract

We consider a communication market where a set of wireless operators compete over a large common pool of users. The latter have a reservation utility of U0 units or, equivalently, an alternative option to satisfy their communication needs. The operators must satisfy these minimum requirements in order to attract the users. In this setting, we analyze how the users select operators and how the operators compete for the users. We identify the critical system parameters and study how they affect the market operation. We model the users decisions and interaction as an evolutionary game and the competition among the operators as a noncooperative pricing game which is proved to be a potential game. For each set of prices selected by the operators, the evolutionary game attains a different stationary point. We show that the outcome of both games depends on the reservation utility of the users and the amount of spectrum W the operators have at their disposal. We express the market welfare and the revenue of the operators as functions of these two parameters. Accordingly, we consider the scenario where a regulating agency is able to intervene and change the outcome of the market by tuning W and/or U0. Different regulators may have different objectives and criteria according to which they intervene. We analyze the various possible regulation methods and discuss their requirements, implications and impact on the market. © 2012 Univ of Avignon.