Data demand dynamics and profit maximization in communications markets

Abstract

In this paper, we focus on the users' aggregate data demand dynamics in a wireless communications market served by a monopolistic wireless service provider (WSP). Based on the equilibrium data demand, we optimize the WSP's data plans and long-term network capacity decisions to maximize its profit. For a market where two different data plans are offered, it is shown that the existence of a unique equilibrium data demand depends on the data plans, and the convergence of data demand dynamics is subject to the network congestion cost, which is closely related to the WSP's network capacity. A sufficient condition on the network congestion cost indicates that the WSP needs to provide a sufficiently large network capacity to guarantee the convergence of data demand dynamics. Then, we formalize the problem of optimizing the WSP's data plans and network capacities to maximize its profit, and solve it numerically.