Joint Price Competition and Resource Allocation for Duopoly Femtocell Market

Femtocell provides a potential solution for poor coverage and capacity limitation in the indoor environment. For wireless service providers (WSPs), the emerging femtocell market brings new opportunities as well as challenges. In this paper, we propose an economic framework for an oligopolistic femtocell market, where selfish WSPs try to maximize their net profits by price competition and resource allocation. When analyzing the optimal strategy for each WSP, we are facing two major challenges. On the one hand, it is difficult for a WSP to acquire complete information about its rival to make well-informed decisions. On the other hand, the market share of a WSP is not only determined by its own price and quality of service (QoS), but also affected by prices and QoS of other WSPs. To address these problems, we formulate the oligopolistic femtocell market as a Bayesian game, where WSPs with incomplete information of their competitors optimize pricing and resource allocation strategies based on a well-round market analysis. We first study the scenario where all WSPs enter the femtocell market at the same time and unaware of each other's strategy. Then, we consider the scenario where WSPs enter the femtocell market sequentially, and the newcomers can observe the strategy of the incumbent. We derive the optimal pricing and resource allocation strategy for each WSP and obtain the Bayesian Nash equilibrium of the whole game. We conduct simulations to evaluate the proposed economic framework in terms of market entry sequence, information status, and strategy space.