Sponsored Data: Cooperative Pricing and Subsidizing Strategies of Mobile Telecom Carriers and Internet Content Providers

Mobile telecom carriers (MTCs) charge Internet content providers (ICPs) for subsidization fees, and ICPs subsidize end users some or all of their data traffic consumption to browse online content. This study employs a two-leaders and two-followers Stackelberg game to investigate the cooperative behavior in pricing strategies of competing MTCs and subsidizing strategies of competing ICPs through sponsored data plans. The results reveal that the ICP with smaller intrinsic value (the MTC with larger intrinsic value) is more probably to benefit from sponsored data plans than the ICP with larger intrinsic value (the MTC with smaller intrinsic value), and MTCs and ICPs may get into a prisoner's dilemma game under certain intensities of market competition. When both ICPs adopt sponsored data plans provided by the two MTCs, the ICP with smaller intrinsic value tends to subsidize a higher proportion than the ICP with larger intrinsic value, and EUs of the MTC with larger intrinsic value are subsidized a lower proportion than those homing to the MTC with smaller intrinsic value.