Game Theory for Networks. 7th International EAI Conference, GameNets 2017 Knoxville, TN, USA, May 9, 2017, Proceedings

Research Article

Comparing Customer Taste Distributions in Vertically Differentiated Mobile Service Markets

  • @INPROCEEDINGS{10.1007/978-3-319-67540-4_13,
        author={Olga Galinina and Leonardo Militano and Antonino Orsino and Sergey Andreev and Giuseppe Araniti and Antonio Iera and Yevgeni Koucheryavy},
        title={Comparing Customer Taste Distributions in Vertically Differentiated Mobile Service Markets},
        proceedings={Game Theory for Networks. 7th International EAI Conference, GameNets 2017 Knoxville, TN, USA, May 9, 2017, Proceedings},
        proceedings_a={GAMENETS},
        year={2017},
        month={9},
        keywords={},
        doi={10.1007/978-3-319-67540-4_13}
    }
    
  • Olga Galinina
    Leonardo Militano
    Antonino Orsino
    Sergey Andreev
    Giuseppe Araniti
    Antonio Iera
    Yevgeni Koucheryavy
    Year: 2017
    Comparing Customer Taste Distributions in Vertically Differentiated Mobile Service Markets
    GAMENETS
    Springer
    DOI: 10.1007/978-3-319-67540-4_13
Olga Galinina1, Leonardo Militano2, Antonino Orsino1,*, Sergey Andreev1, Giuseppe Araniti2, Antonio Iera2, Yevgeni Koucheryavy1
  • 1: Tampere University of Technology
  • 2: University Mediterranea of Reggio Calabria
*Contact email: antonino.orsino@tut.fi

Abstract

In this paper, we study a vertically differentiated duopoly market, where competitors (mobile service providers) offer mobile subscriptions to customers, who diversify in their preferences regarding price and quality. We consider a two-stage game where the players first select the quality and then begin a competitive process for the price or quantity, which is widely known as Bertrand or Cournot game, respectively. To capture the service provider strategy, we first introduce variable costs to improve the quality, which are linear in quality per a subscription, and then derive the market-related metrics of interest for the tractable uniform distribution of the customer’s taste parameter. Further relaxing this strong assumption, we provide with a numerical procedure that helps characterize an arbitrary taste distribution as well as an arbitrary cost function. Finally, selected numerical examples report on the comparison between the uniform and the truncated exponential distribution, thus accentuating the importance of choosing an appropriate customer taste model.