Cognitive femtocell market: How to price?

Cognitive femtocell has been envisioned as a promising technology for covering indoor environment and assisting heavy-loaded macrocell network. Although lots of technical issues of it have been studied, e.g., spectrum sharing, interference mitigation, etc, the economic issues that are very important for practical femtocell deployment have not been well investigated in the literatures. In this paper, we focus on the pricing issues in cognitive femtocell network, and propose a two-tier pricing game theoretic framework with a dynamic pricing model. We first model the cognitive users´ network access behavior as a 2-dimensional Markov decision process and propose a modified value iteration algorithm to find the best strategy profiles for cognitive users. Based on the analysis of users´ behavior, we further design an iterative gradient descent algorithm to find the Nash equilibrium pricing strategies for both macrocell and femtocell operators. Simulation results verify our theoretic analysis and show that the proposed algorithm can quickly converge to the Nash equilibrium prices.