Abstract

http://ssrn.com/abstract=1019121
 
 

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Network Neutrality on the Internet: A Two-Sided Market Analysis


Nicholas Economides


New York University - Leonard N. Stern School of Business - Department of Economics

Joacim Tåg


Research Institute of Industrial Economics (IFN)

August 2012

Information Economics and Policy, Vol. 24, 2012
NET Institute Working Paper No. 07-45
NYU Law and Economics Research Paper 07-40
NYU Working Paper No. 2451/26057

Abstract:     
We discuss network neutrality regulation of the Internet in the context of a two-sided market model. Platforms sell broadband Internet access services to residential consumers and may set fees to content and application providers on the Internet. When access is monopolized, cross-group externalities (network effects) can give a rationale for network neutrality regulation (requiring zero fees to content providers): there exist parameter ranges for which network neutrality regulation increases the total surplus compared to the fully private optimum at which the monopoly platform imposes positive fees on content providers. However, for other parameter values, network neutrality regulation can decrease total surplus. Extending the model to a duopoly of residential broadband ISPs, we again find parameter values such that network neutrality regulation increases total surplus suggesting that network neutrality regulation could be warranted even when some competition is present.

Number of Pages in PDF File: 15

Keywords: Network neutrality, two-sided markets, Internet, monopoly, duopoly, regulation, discrimination, AT&T, Verizon, Comcast, Google

JEL Classification: L1, D4, L12, L13, C63, D42, D43

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Date posted: October 4, 2007 ; Last revised: October 25, 2012

Suggested Citation

Economides, Nicholas and Tåg, Joacim, Network Neutrality on the Internet: A Two-Sided Market Analysis (August 2012). Information Economics and Policy, Vol. 24, 2012; NET Institute Working Paper No. 07-45; NYU Law and Economics Research Paper 07-40; NYU Working Paper No. 2451/26057. Available at SSRN: http://ssrn.com/abstract=1019121 or http://dx.doi.org/10.2139/ssrn.1019121

Contact Information

Nicholas Economides (Contact Author)
New York University - Leonard N. Stern School of Business - Department of Economics
44 West 4th Street
New York, NY 10012
United States
212-998-0864 (Phone)
212-995-4218 (Fax)
HOME PAGE: http://www.stern.nyu.edu/networks/
Joacim Tåg
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
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