The Interplay of Competition and Cooperation Among Service Providers (Part II)

Abstract: This paper investigates the incentives of mobile network operators (MNOs) for acquiring additional spectrum to offer mobile virtual network operators (MVNOs) and thereby inviting competition for a common pool of end users (EUs). We consider interactions between two service providers, an MNO and an MVNO, when the EUs 1) must choose one of them 2) have the option to defect to an outside option should the SP duo offer unsatisfactory access fees or qualities of service. We formulate a multi-stage hybrid of cooperative bargaining and non-cooperative games in which the two SPs jointly determine their spectrum acquisitions, allocations and mutual money flows through the bargaining game, and subsequently individually determine the access fees for the EUs through the non-cooperative game. We identify when the overall equilibrium solutions exist, when it is unique and characterize the equilibrium solutions when they exist. The characterizations are easy to compute, and are in closed form or involve optimizations in only one decision variable. The hybrid framework allows us to determine whether and by how much the different entities benefit due to the cooperation in spectrum acquisition decision.