Optimal Incentive-Compatible Pricing for Dynamic Bandwidth Trading and Allocation in Efficient Spectrum Management

The wireless spectrum is a limited resource. The concepts of cognitive radio and dynamic spectrum allocation (DSA) have been considered as a possible mechanism to improve the efficiency of bandwidth usage and solve the bandwidth deficiency problem. In this work, we propose an open interactive dynamic bandwidth trading model to enable periodic, short-term trading of unused bandwidth by licensed spectrum owners to sublet their surplus resources to service providers that need bandwidth. The model comprises of two phases. The goal of the phase one is to find out the demand of the intended buyers through multiple rounds of learning and revising of the quantity-price schedule. Based on the type distribution of the intended potential buyers, the optimal quantity-price schedule is derived which satisfies the incentive compatibility (aka self-selection) and the individually rational constraints that maximizes the MNO's profit and assures that the quantity-price pair designed for MVNO of a specific type will choose the pair that maximizes its utility. We also present an algorithm to convert the continuous optimal quantity-price schedule to a discrete one so as to provide a simple easy-to-read format for MVNOs' selection. If the total number of bandwidth requests exceeds the total capacity constraint, a bounded knapsack problem is used to resolve for final bandwidth allocation. Lastly, an example is provided to illustrate the process.