Prospect Pricing in Cognitive Radio Networks

Advances in cognitive radio networks have primarily focused on the design of spectrally agile radios and novel spectrum sharing techniques that are founded on Expected Utility Theory (EUT). In this paper, we consider the development of novel spectrum sharing algorithms in such networks taking into account human psychological behavior of the end-users, which often deviates from EUT. Specifically, we consider the impact of end-user decision making on pricing and management of radio resources in a cognitive radio enabled network when there is uncertainty in the Quality of Service (QoS) guarantees offered by the Service Provider (SP). Using Prospect Theory (a Nobel-Prize-winning behavioral economic theory that captures human decision making and its deviation from EUT), we design data pricing and channel allocation algorithms for use in cognitive radio networks by formulating a game theoretic analysis of the interplay between the price offerings, bandwidth allocation by the SP and the service choices made by end-users. We show that, when the end-users under-weight the service guarantee, they tend to reject the offer which results in under-utilization of radio resources and revenue loss. We propose prospect pricing, a pricing mechanism that can make the system robust to decision making and improve radio resource management. We present analytical results as well as preliminary human subject studies with video QoS.