Telecommunication market share game: Inducing boundedly rational consumers via price misperception

Abstract

This paper presents some interesting findings about consumer confusion vis-a-vis real price for offered services and its impact on Telecommunications market dynamics. Noting that pricing strategies have a critical influence on consumer choice, customer satisfaction and customer retention in the telecommunications sector, our study focuses on the analysis of the service providers' strategic behavior. Yet, we construct a simple oligopolistic model to capture the interactions among service providers and end users. Next, we analyze the behavior of service providers in terms of their pricing strategies within the framework of non-cooperative game theory. It aims to evaluate the impact of consumer confusion on the competition and operators profitability. Here, rational service providers are competing with each other to maximize their respective payoffs in presence of both a fraction of confused consumers while others are non confused. We provide some interesting results regarding the Nash equilibrium of this game. More precisely, we showed existence and uniqueness of the Nash equilibrium under some conditions. Furthermore, we introduce two learning algorithms that may lead operators to learn their strategic pricing schemes in a complete distributed manner. Extensive simulations show convergence of a proposed scheme to the Nash equilibrium and give some insights on how the game parameters may vary the oligopoly outcome.