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

45 Pages Posted: 10 Sep 2013

See all articles by Nicholas Economides

Nicholas Economides

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

Joacim Tåg

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: November 2007

Abstract

Two-sided market model in which platforms sell Internet access services to consumers and may set fees to content and applications providers 'on the other side' of the Internet. When access is monopolized, we find that generally net neutrality regulation (that imposes zero fees 'on the other side' of the market) increases total industry surplus compared to the fully private optimum at which the monopoly platform imposes positive fees on content and applications providers. Similarly, we find that imposing net neutrality in duopoly increases total surplus compared to duopoly competition between platforms that charge positive fees on content providers. We also discuss the incentives of duopolists to collude in setting the fees 'on the other side' of the Internet while competing for Internet access customers. Additionally, we discuss how price and non-price discrimination strategies may be used once net neutrality is abolished. Finally, we discuss how the results generalize to other two-sided markets.

Keywords: net neutrality, two-sided markets, Internet, monopoly, duopoly, regulation, discrimination

Suggested Citation

Economides, Nicholas and Tåg, Joacim, Net Neutrality on the Internet: A Two-Sided Market Analysis (November 2007). NYU Working Paper No. 2451/26057. Available at SSRN: https://ssrn.com/abstract=2323438

Nicholas Economides (Contact Author)

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

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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