Optimal Auction Design for WiFi Procurement

Forthcoming, Information Systems Research

50 Pages Posted: 17 Nov 2013 Last revised: 18 Nov 2017

See all articles by Liangfei Qiu

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Huaxia Rui

University of Rochester - Simon Business School

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: June 29, 2017

Abstract

The unprecedented growth of cellular traffic driven by web surfing, video streaming, and cloud-based services poses bandwidth challenges for cellular service providers. To manage the increasing data traffic, cellular service providers are experimenting the use of third-party WiFi hotspots to augment its cellular capacity. We develop an analytical framework to study the optimal procurement auction for WiFi capacity. Such an auction design is complicated by the fact that WiFi networks have much more limited spatial coverages compared with the cellular network. Neither a global auction that includes all WiFi hotspots nor multiple local auctions that include only hotspots in each local WiFi region is optimal. We find that the optimal mechanism is an integration of one global auction which includes hotspots from an endogeneously determined set of WiFi regions and many separate local auctions which are only held in the rest of the WiFi regions. To implement the optimal mechanism, we also provide an efficient algorithm whose computation complexity is of the order of the number of WiFi regions. Our work contributes to the literature by designing the optimal mechanism for a unique type of IT procurement auction problem which is a tight integration of economics and computational technology.

Keywords: WiFi offloading, procurement auction, mechanism design

JEL Classification: D44, L96, D86

Suggested Citation

Qiu, Liangfei and Rui, Huaxia and Whinston, Andrew B., Optimal Auction Design for WiFi Procurement (June 29, 2017). Forthcoming, Information Systems Research, Available at SSRN: https://ssrn.com/abstract=2355432 or http://dx.doi.org/10.2139/ssrn.2355432

Liangfei Qiu (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/qiuliangfei/

Huaxia Rui

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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