Telecommunications market share game with ambiguous pricing strategies

Abstract

The purpose of this article is to bring interesting findings about consumer confusion. Obviously one of the major economic challenge is to define the most realistic consumer model on the purchasing decision making. This decision is highly limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a choice. The notion of consumer confusion has recently gained considerable popularity in the economics such as behavioral sciences leading researchers to propose appropriate models to understand their impact on the competition. We propose on this paper a new approach concerning the consumer confusion using game-theoretical analysis which describe the interactions between two concurrent service providers and the effect of this confusion on the competition. In this paper we consider a duopoly model of rational Service providers competing to maximize profit in a market of confused and non confused population. We prove using non cooperative game theory inside a confused environment, contrary to what seems intuitively right, that there is a Nash equilibrium to this pricing game. We also show that the stability of this competition is verified under some conditions on price sensitivity and the ISPs use advertising to increase their benefit among the confused subscribers.