Bandwidth and Price Competitions of Wireless Service Providers in Two-Stage Spectrum Market

Significant technology progress has been witnessed in the research area of dynamic spectrum access. However, the success of dynamic spectrum access will not be possible without the evolution of an spectrum and service market which is both stable and efficient. In this paper, we investigate the dynamic access spectrum from the economic point of view. We study three-layer spectrum market with spectrum holder, wireless service provider and end users. In a duopoly situation, two wireless service providers participate in bandwidth competition to purchase spectrum and price competition to attract end users, with the aim of maximizing their own profit. We formulate the wireless service providers' competition as a two-stage game. Under general assumptions about the pricing and demand functions, a unique equilibrium is identified as the outcome of the game, which shows the stability of the market. We further evaluate the market efficiency in a special case of symmetric wireless service providers and affine pricing and demand functions. The result shows the efficiency of the equilibrium is of reasonable level even with non-cooperative wireless service providers.