Analysis of Duopoly Price Competition Between WLAN Providers

Abstract

With the rapid development of wireless Internet services, several WLAN service providers may coexist in one public hotspot to compete for the same group of customers, leading to an inevitable price competition. The charged price and the provisioned packet loss at each provider are major factors in determining users' demands and behaviors, which in turn will affect providers' revenue and social welfare. In this paper, we set up a novel game model to analyze a duopoly price competition. We first show the users' demands are distributed between providers according to a Wardrop Equilibrium and then prove the existence of a Nash equilibrium on providers' charged prices. Through analysis, we further find that in Nash equilibrium state the social welfare is very close to its maximal value in cooperative situation. Furthermore, the providers' aggregate revenues also do not decrease when the users have high sensitivity about the charged prices. Thus the competitive duopoly WLAN market can still run in an efficient way even in the absence of complex regulation schemes.

Wireless local area network service providers’ price competition in presence of heterogeneous user demand

“…Hence, a PoA very close to unity is obtained for WLAN SPs duopoly in presence of homogeneous user demand. This is consistent with the results obtained in [4]. Even for heterogeneous user demand with reasonable variance in α n ∀n ∈ N, a PoA close to unity is obtained as shown in [9].…”

“…□ For illustration, we analyse the case of two SPs that is a duopoly scenario. As in [4,9], let the user utility function of the equilibrium characterising user type n be u mn = a n q m − b n p m ,…”

“…Since a user can move to a satisfactory location to ensure a minimal acceptable P t m based on the QoS requirements, we consider that P t m at any SP is constant for the users at that SP. Given that the SPs want to maximise individual profits, as in [4,9], we consider the case of maximum saturation throughput for the users. Thus, an approximation of the packet collision rate P c m can be written as [11] …”

Duopoly price competition of WLAN service providers in presence of heterogeneous user demand

“…In [6], a location dependent multi-AP reverse auction pricing game has been studied. Note that [5] utilizes results obtained in [2] (which assumes convex latency functions) for PLR (which is a concave latency function [12]). Hence, further investigation in this field is required.…”

“…Price competition for two types of users, primary and secondary, in cognitive wireless mesh networks has been investigated in [4]. Duopoly price competition between WLAN providers for a homogeneous group of users with packet loss rate (PLR) as the basis of negative externality [1] has been analyzed in [5]. In [6], a location dependent multi-AP reverse auction pricing game has been studied.…”