A game theoretic model for cellular network operators’ cooperation under government intervention

Abstract

In the digital world today, cellular networks and their operators play a competitive and important role in communications. The bases of the competition of operators are the quality of provided services and the coverage level of their antennas, thereby attract customers. This paper studies cellular networks with two old and new operators and under the influence of government intervention in one area. Due to the high cost of building an antenna, the new operator participates in the cost of the infrastructure of the old operator to use the services of these antennas for their customers. On the other hand, the government considers incentive schemes to support mobile operators. The government plans to take part in the infrastructure costs of the old operator, and will receive the income tax from it. Hence, the new operator will go off from paying tax. The government subsidy contract with the old operator is based on the coverage level of the antenna and supports the operator to increase the coverage level. By doing so, the quality level of services and coverage development rate for the old operator increases, leading to increased demand and increased profits for this operator. On the other hand, as government support increases the demand for the old operator, the demand for the new operator decreases and the profit of the new operator decreases. Some numerical examples for Iranian telecommunication companies are applied to examine the applicability of the proposed models. Finally, sensitivity analysis on the main parameters is analyzed in-depth to extract some managerial implications.