Sponsored Data: Smarter Data Pricing with Incomplete Information

Posted: 27 Jan 2020

See all articles by Xiaowei Mei

Xiaowei Mei

Hong Kong Polytechnic University - Department of Management and Marketing

Hsing Kenneth Cheng

University of Florida - Warrington College of Business

Shubho Bandyopadhyay

University of Florida - Warrington College of Business Administration

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Lai Wei

Shanghai Jiao Tong University (SJTU)

Date Written: January 2, 2020

Abstract

As the amount of online content explodes, mobile network operators (MNOs) are investigating new business models that encourage content providers (CPs) to sponsor data for consumers. We analyze this recent phenomenon using an incomplete information game-theoretical model, where the MNO does not observe consumers’ types (personal valuation of mobile data), and provides multiple data plans to consumers. We find that the impact of sponsored data on consumer surplus crucially depends on whether the MNO has complete information over consumer types: Under complete information, sponsored data does not improve consumer surplus. However, under incomplete information, sponsored data increases consumer surplus. Our analysis also shows that under incomplete information, the MNO should allow sponsored data in a wider range of market conditions than those under complete information. Our study finds that prior literature tends to underestimate both the long-run detrimental effect of sponsored data on content diversity and the short-run beneficial effect on consumer surplus. Our findings have important managerial implications for the MNO who is interested in optimizing the data plans and for policymakers who regulate the wireless internet market.

Keywords: Sponsored Data, Wireless Internet, Game Theory, Incomplete Information, Consumer Surplus

Suggested Citation

Mei, Xiaowei and Cheng, Hsing Kenneth and Bandyopadhyay, Subhajyoti and Qiu, Liangfei and Wei, Lai, Sponsored Data: Smarter Data Pricing with Incomplete Information (January 2, 2020). Available at SSRN: https://ssrn.com/abstract=3512943

Xiaowei Mei

Hong Kong Polytechnic University - Department of Management and Marketing ( email )

Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M801
China

Hsing Kenneth Cheng

University of Florida - Warrington College of Business ( email )

P.O. Box 117169
Gainesville, FL 32611-7169
United States
352-392-7068 (Phone)
352-392-5438 (Fax)

Subhajyoti Bandyopadhyay

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

Gainesville, FL 32611
United States

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/

Lai Wei

Shanghai Jiao Tong University (SJTU) ( email )

800 Dongchuan Rd
Minhang, Shanghai 200240
China

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