Impact of end-user decisions on pricing in wireless networks under a multiple-user-single-provider setting

We consider the impact of end-user decision-making on pricing of wireless resources when there is uncertainty in the Quality of Service (QoS) guarantees offered by the Service Provider (SP). Specifically, we consider the scenario where an SP tries to sell wireless broadband services to multiple potential customers when the advertised transmission rate cannot be fully guaranteed at all times. Modeling the decision-making of the end-users using Prospect Theory (a Nobel-Prize-winning theory that captures human decision-making and its deviation from Expected Utility Theory (EUT)), we formulate a game to study the interplay between the price offerings, bandwidth allocation by the SP and the service choices made by end-users. We characterize the Nash Equilibria (NE) of the underlying game and study the impact of such decision-making on the system performance as well as revenue. We propose “prospect pricing,” a pricing mechanism that can make the system robust to decision-making that deviates from EUT.