Incentive design and market evolution of mobile user-provided networks

An operator-assisted user-provided network (UPN) has the potential to achieve a low cost ubiquitous Internet connectivity, without significantly increasing the network infrastructure investment. In this paper, we consider such a network where the network operator encourages some of her subscribers to operate as mobile Wi-Fi hotspots (hosts), providing Internet connectivity for other subscribers (clients). We formulate the interaction between the operator and mobile users as a two-stage game. In Stage I, the operator determines the usage-based pricing and quota-based incentive mechanism for the data usage. In Stage II, the mobile users make their decisions about whether to be a host, or a client, or not a subscriber at all. We characterize how the users' membership choices will affect each other's payoffs in Stage II, and how the operator optimizes her decision in Stage I to maximize her profit. Our theoretical and numerical results show that the operator's maximum profit increases with the user density, and the profit gain can be up to 50% in a dense network comparing with a pricing-only approach with no incentives.