ABSTRACT
A telecommunication operator adopting a decentralized decision-making is described as a twolevel decentralized system. A bilevel programming model for the incentive problem about the value-added services is formulated. This problem arises from the conflict between two services provided by the countrywide SP and by the local SP when the division operates them. The share proportion of the revenue that the headquarters requires each division to pay is proposed as an incentive strategy. An optimization algorithm for solving the model is presented. As a numerical example, this model is applied to an actual incentive problem about the value-added services of a telecommunication operator. If the headquarters adopts the optimal share proportions, the divisions could be effectively motivated to do their best to the whole corporation. As a consequence, the profit of the corporation increases. It provides a powerful support to telecommunication operators for their decision-making on the incentive problem.
