Asymmetric-valued spectrum auction and competition in wireless broadband services

Abstract

We study bidding and pricing competition between two spiteful mobile network operators (MNOs) with considering their existing spectrum holdings. Given asymmetric-valued spectrum blocks are auctioned off to them via a first-price sealedbid auction, we investigate the interactions between two spiteful MNOs and users as a three-stage dynamic game and characterize the dynamic game's equilibria. We show an asymmetric pricing structure and different market share between two spiteful MNOs. Perhaps counter-intuitively, our results show that the MNO who acquires the less-valued spectrum block always lowers his service price despite providing double-speed LTE service to users. We also show that the MNO who acquires the high-valued spectrum block, despite charing a higher price, still achieves more market share than the other MNO. We further show that the competition between two MNOs leads to some loss of their revenues. By investigating a cross-over point at which the MNOs' profits are switched, it serves as the benchmark of practical auction designs.

Game-Theoretic Understanding of Price Dynamics in Mobile Communication Services

“…We analyze mobile communications markets using Cournot and Bertrand competition models [15]- [18]. In [15]- [17], we suggest spectrum policies and subsidization schemes for improving user welfare in mobile communications.…”

“…In [15]- [17], we suggest spectrum policies and subsidization schemes for improving user welfare in mobile communications. In [18], we investigate the effect of allocation of asymmetric-valued spectrum blocks on mobile communications markets. However, our previous works focus on spectrum allocation and have not dealt with price dynamics in mobile communications.…”