In the mobile communication services, users wish to subscribe to high quality service with a low price level, which leads to competition between mobile network operators (MNOs). The MNOs compete with each other by service prices after deciding the extent of investment to improve quality of service (QoS). Unfortunately, the theoretic backgrounds of price dynamics are not known to us, and as a result, effective network planning and regulative actions are hard to make in the competitive market. To explain this competition more detail, we formulate and solve an optimization problem applying the two-stage Cournot and Bertrand competition model. Consequently, we derive a price dynamics that the MNOs increase and decrease their service prices periodically, which completely explains the subsidy dynamics in the real world. Moving forward, to avoid this instability and inefficiency, we suggest a simple regulation rule which leads to a Pareto-optimal equilibrium point. Moreover, we suggest regulator's optimal actions corresponding to user welfare and the regulator's revenue.
In @cite_10 , the author shows that service price and QoS are inter-related in communications networks, and suggests Paris metro pricing (PMP) for Internet. PMP is a kind of price discrimination over different QoS levels; the higher QoS, the higher price. In that paper, the author finds that the service price and QoS will converge to an equilibrium point after a number of interactions. PMP is further extended by Walrand @cite_0 , who formulates an Internet pricing model under price and QoS constraints. In that work, the author investigates how much PMP improves the operator's profit compared to a single optimal service price. The author also analyzes price competition between two homogeneous network operators, the network capacities of which are fixed. In @cite_2 , we show the dynamics of price competition ( price war ) using the Walrand model @cite_0 , and suggest a regulation for price level convergence.
@cite_0 @cite_10 @cite_2
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Standard performance evaluations of communication networks focus on the technology layer where protocols define precise rules of operations. Those studies assume a model of network utilization and of network characteristics and derive performance measures. However, performance affects how users utilize the network. Also, investments by network providers affect performance and consequently network utilization. We call the actions of users and network providers the “economic layer” of the network because their decisions depend largely on economic incentives. The economic and technology layers interact in a complex way and they should be studied together. This tutorial explores economic models of networks that combine the economic and technology layers. A simple approach, called PMP (Paris Metro Pricing), is suggested for providing differentiated services in packet networks such as the Internet. It is to partition a network into several logically separate channels, each of which would treat all packets equally on a best effort basis. There would be no formal guarantees of quality of service. These channels would differ only in the prices paid for using them. Channels with higher prices would attract less traffic, and thereby provide better service. Price would be the primary tool of traffic management. PMP is the simplest differentiated services solution. It is designed to accommodate user preferences at the cost of sacrificing some of the utilization efficiency of the network. In recent years, to satisfy people's need for wireless services, the number of access points of the 3G-based systems, WiFi and WiMAX has been increased exponentially by wireless service providers (WSPs). As a result, there are many WSPs coexisting in the same hotspot area, which drives price competition among WSPs. Existing researche shows that each WSP will lower its price to increase revenue or market share, and this kind of price competition will eventually damage every WSP with the revenue decrease. However in this paper, we show that there is another type of price competition, where the WSPs' decreasing or increasing price levels occurs periodically and there is no equilibrium point. We illustrate it by using an example of the duopoly price competition and suggest a simple regulation rule that leads to an equilibrium point. Moreover, we show that the equilibrium point is Pareto-optimal and is well balanced in the aspects of total revenue, fairness and social welfare.