Game Theory and WiFi Pricing

Professor John Musacchio

Information Systems and Technology Management

SoE, UC Santa Cruz

Musacchio@soe.ucsc.edu

Abstract:

In the first half of the talk we present a short tutorial covering basic models from game theory, and show how these models may be used to understand the strategic relationships between parties such as competing hi-tech firms, and buyers and sellers of a hi-tech product or service. In the second half of the talk, we focus on the strategic relationship between a WiFi access point and a paying client and model their interactions as a dynamic game. We find the Nash Equilibria of this game, under different assumptions of the client's temporal utility function.

Presentation Slides: Live (HTML), PDF 664 KB

Key Lessons:

1) Game theory is a useful tool in understanding the strategic relationships between competing firms.

2) A Nash equilibrium is a set of players' strategy such that no player can do better by unilaterally changing to another strategy. However, one cannot always expect the players to play the Nash equilibrium strategies.

3) Games can be played in a single stage (Prisoner's Dilemma), or in multiple stages (Repeated Innovating Firms example). Oftentimes repeated games have Nash Equilibria in which players cooperate to maximize their combined welfare while such cooperation not a Nash Equilibrium for the corresponding single stage game.

About the Speaker:

John Musacchio is an Assistant Professor of Information Systems and Technology Management at the University of California , Santa Cruz . He completed his PhD in Jan 2005 from the Electrical Engineering & Computer Sciences Department at the University of California, Berkeley . His research interests include pricing of communications networks, game theory, and stochastic modeling and control of queuing networks. Professor Musacchio has also had experiences in industry including helping to architect a high-speed switch fabric chipset for the Silicon Valley start-up company Terablaze.