Competitive behaviour of major GSM firms’ internet data pricing in Nigeria: A game theoretic model approach

Abstract

The study investigated the competitive behaviour of major GSM service providers’ Internet data pricing in Nigeria. Two null hypotheses were tested: The major GSM service providers in Nigeria do not have a dominant pricing strategy; and there is no Nash Equilibrium for the pricing strategies of the major GSM service providers in Nigeria. The design was a longitudinal study of the active GSM subscribers and Internet data prices of major GSM service providers in Nigeria (MTN and the others). Two pricing strategies were employed, “charge N1000 per data plan” and “charge N1200 per data plan”. A zero-sum payoff table was obtained from the data on GSM subscribers and Internet bundle prices in Nigeria. The payoff table was analysed using mixed strategy approach. The results revealed that each player has a dominant strategy. The game has a Pareto optimal Nash equilibrium with disparate dominant strategies for both players. The Nash equilibrium is that the other GSM firms charge N1000 per internet data plan while MTN charges N1200 per Internet data plan. At a price of N1000 and N1200 per Internet data plan, the earnings of the other GSM service providers and MTN are maximised respectively irrespective of what the other player does. The study concludes that major GSM firms can use game theory to model the pricing strategy of competitors and predict the behaviour of Internet data subscribers.