WiFi access point pricing as a dynamic game

Abstract

We study the economic interests of a wireless access point owner and his paying client, and model their interaction as a dynamic game. The key feature of this game is that the players have asymmetric information - the client knows more than the access provider. We find that if a client has a "web browser" utility function (a temporal utility function that grows linearly), it is a Nash equilibrium for the provider to charge the client a constant price per unit time. On the other hand, if the client has a "file transferor" utility function (a utility function that is a step function), the client would be unwilling to pay until the final time slot of the file transfer. We also study an expanded game where an access point sells to a reseller,which in turn sells to a mobile client and show that if the client has a web browser utility function, that constant price is a Nash equilibrium of the three player game. Finally, we study a two player game in which the access point does not know whether he faces a web browser or file transferor type client, and show conditions for which it is not a Nash equilibrium for the access point to maintain a constant price.

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