The value of side-information in Secondary Spectrum Markets

Abstract

We consider a secondary spectrum market where primaries set prices for their unused channels. The payoff of a primary then depends on the availability of channels for its competitors, which a primary might not have information about. We study a model where a primary can acquire this competitor’s channel state information (C-CSI) at a cost. We formulate a game between two primaries, where each primary decides whether to acquire the C-CSI or not and then selects its price based on that. We first characterize the Nash equilibrium of this game for a symmetric model where the C-CSI is perfect. We show that the payoff of a primary is independent of the C-CSI acquisition cost. We then generalize our analysis to allow for imperfect estimation and cases, where the two primaries have different C-CSI costs or different channel availabilities. Our results show interestingly that the payoff of a primary increases when there is estimation error. We also show that surprisingly the expected payoff of a primary may decrease when the C-CSI acquisition cost decreases or primaries have different availabilities.