An Analysis of Service Bundles of Mobile Network Operators with Free Services Included

To attract more users, mobile network operators may offer both chargeable/metered and free services as parts of their product bundles. However, an extra cost of providing the free services and their substitution effect on metered services in the bundles may reduce their profitability. Therefore, the mobile network operators must decide on including free services in their offered bundles based on the profitability. In this paper, we develop an analytical framework composed of leader-follower game models to obtain the Stackelberg equilibrium strategy of the mobile network operators and analyze several important properties of the equilibrium. The proposed framework takes into account the congestion effect resulting from incorporating free services in the bundles. The game models are general and capable of analyzing different setting of bundles. Extensive performance evaluations show that the inclusion of free services can improve the profit of the mobile network operators when (i) the users’ interest for the free services is above a certain value, (ii) the free services add small cost to the bundle, and (iii) the users’ demand of free services is less dependent on that of metered services in the bundle.

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