Impact of end-user decisions on pricing in wireless networks

We consider the impact of end-user decision-making on pricing of wireless resources when there is uncertainty in the Quality of Service (QoS) guarantees offered by the Service Provider (SP). Specifically, we consider a scenario where an SP tries to sell wireless broadband services to a potential customer when the advertised transmission rate cannot be fully guaranteed at all times. Relying on Prospect Theory (PT), a Nobel Prize winning theory developed by Kahneman and Tversky to explain people´s real life decision-making that often violates the principles of the Expected Utility Theory (EUT), we formulate a game theoretic model to study the interplay between price offerings of the SP and the service choices made by the end-user. We characterize the Nash Equilibrium (NE) of the underlying game and provide insights into the impact of the deviations of decision-making from that expected under EUT and show how pricing can be used as a mechanism to mitigate such impact.