Auction-Based Network Selection in a Market-Based Framework for Trading Wireless Communication Services

A digital marketplace (DMP) is a market-based framework in which a network selection mechanism is facilitated through a variant of procurement first-price sealed-bid auction, i.e., wireless network operators (NOs) bid for the right to transport the subscriber´s requested service over their infrastructure. In this paper, we create an economic model of this mechanism, and we characterize the equilibrium under generic assumptions about the cost distributions of the NOs. Furthermore, the equilibrium is explicitly derived under more specific assumptions about the model, i.e., two NOs and costs drawn from uniform distributions. In this case, we also characterize the expected prices that the subscriber has to pay depending on their preferences about the service, e.g., trading off quality for a lower price. Finally, we provide a numerical analysis of the case with more than two NOs.