Pricing and Efficiency in the Market for IP Addresses
Benjamin G. Edelman
Harvard University - HBS Negotiations, Organizations and Markets Unit
Yahoo! Research Labs; National Bureau of Economic Research (NBER)
April 15, 2014
Harvard Business School NOM Unit Working Paper No. 12-020
We consider market rules for transferring IP addresses, numeric identifiers required by all computers connected to the Internet. Transfers usefully move resources from lowest to highest-valuation networks, but transfers tend to cause socially costly growth in the Internet's routing table. We propose a market rule that avoids excessive trading and comes close to achieving social efficiency. We argue that this rule is feasible despite the limited powers of central authorities. We also offer a framework for reasoning about future prices of IP addresses, then explore the role of rentals in sharing information about the value of IP address and assuring allocative efficiency.
Number of Pages in PDF File: 39
Keywords: market design, externalities, Internet, intermediaries
JEL Classification: D02, D04, D47, L86working papers series
Date posted: September 27, 2011 ; Last revised: April 16, 2014
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