A Bayesian game model for joint pricing and spectrum allocation strategy of femtocell service providers

Abstract

For wireless service providers (WSP), the emerging femtocell market brings new opportunities as well as challenges. It is difficult for a WSP to have complete information of the technical strength of other WSP in the market, and it is hard to estimate the user demand, which is influenced by the price and service quality of all competing WSP in the market. To address these problems, in this paper, we propose an economic framework for the WSP to maximize their utility, via a joint pricing and spectrum allocation strategy, under the condition of incomplete information of other rival WSP in the market. We study two scenarios: 1) all WSP enter the market at the same time; 2) the WSP enter the market at different times. In both scenario, we formulate the problem as a Bayesian game, and derive the Bayesian Nash equilibrium. The simulation results verify that the proposed joint pricing and spectrum allocation strategy outperforms sole pricing or sole spectrum allocation strategy. Interestingly, when the WSP enter the market at different times, the later entered WSP chooses more aggressive pricing and spectrum allocation strategy than the early entered WSP.