PROJECT TITLE :
Economic Analysis of 4G Upgrade Timing
Because the successor to the 3G standard, the 4G cellular standard provides abundant higher information rates to handle cellular users’ ever-increasing demands for prime-speed multimedia communications. This paper analyzes the cellular operators’ timing of network upgrades, by considering user subscription dynamics induced by switching from 3G to 4G technologies. Being the first to upgrade 3G to 4G service, an operator increases its market share but takes additional risk or upgrade price as 4G technology matures over time. This paper 1st studies a 4G monopoly market with one dominant operator and some tiny operators, where the monopolist decides its upgrade time by trading off increased market share and upgrade cost. The paper also considers a 4G competitive market and develops a game theoretic model for learning operators’ interactions. The analysis shows that operators choose completely different upgrade times to avoid severe competition. One operator takes the cause upgrade, using the advantage of a bigger market share to make amends for the larger cost of an early upgrade. This result matches well with many industry observations of asymmetric 4G upgrades. The paper additional shows that the provision of 4G upgrade could decrease each operators’ profits because of increased competition. Perhaps surprisingly, the profits will increase with the upgrade cost.
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