Volume-based pricing in Stackelberg duopoly wireless markets

Volume based data pricing is getting to be the most popular pricing scheme in cellular wireless data networks. While the flat-rate and unlimited data plans are being replaced with this new criterion worldwide, anticipating the provider profit is highly vital in a competitive market. The user behavior acts like a foundation for any analytical structure and it is linked to many network and market parameters. In this paper, we define an analytical framework in a Stackelberg duopoly market in which each provider offers one data plan. Similar to general Stackelberg markets, one provider has better service quality in terms of coverage and offered data rate that puts it in the place to make the first move in service definition. Users are concerned about the quality of service while they have a limitation on their budget as well. We adopt the widely accepted utility theory to build our analysis. In this paper, the budget limits along with negative service quality due to existence of other users and offered data volume size are applied in the user utility and consequently provider profit to build our optimization framework.