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

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 (SPs), a MNO and an MVNO, under two different scenarios: 1) EUs must choose one of them 2) EUs have the option to defect to a provider outside the system under consideration 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 this formulation, first the two SPs jointly determine their spectrum acquisitions, allocations and mutual money flows through the bargaining game; subsequently the two SPs individually determine the access fees for the EUs through the non-cooperative game. We identify when the overall equilibrium solutions exist and when the equilibrium solution is unique. We obtain computationally simple characterizations of the equilibrium solutions when they exist, which 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.