How to Design a Common Telecom Infrastructure by Competitors Individually Rational and Collectively Optimal

The fast development of 4G LTE networks calls for a huge amount of investment on infrastructure that mobile operators could no longer make it alone in building and maintaining their own network infrastructures. How to cut the cost by forming a joint venture responsible for building and maintaining a common infrastructure raises new challenging problems of pricing and coordination in the market making. In this paper, we propose a market solution where the joint venture decouples from the behaviors of share-holding mobile operators. We are interested in the pros and cons in economic benefits for such a joint operation. We set to study the best pricing and sharing strategies that maximizes the aggregate profit of members within the joint venture, each of which follows an individually rational and optimal strategy. Our technical analysis reveals a prisoner's dilemma structure embedded within such a game, which is the main factor leading to important game theoretical properties of such joint ventures. How to avoid the trap of the prisoner's dilemma to agree on the global optimum solution is a subtle challenge here. We develop game theoretical solutions to make such a dream cooperation possible as a Nash equilibrium. We also present experimental studies to verify our results numerically.