Pricing Internet Traffic: Exclusion, Signalling and Screening
AbstractWe consider a network that intermediates traffic between free content providers and consumers. While consumers do not know the traffic cost when deciding on consumption, a content provider knows his cost but may not control the consumption. We study how pricing consumers'and content providers'sides allows both profit extraction from the network and efficient information transmission. In the case of uniform tarif, we argue that a positive price-cap on the charge to content is optimal (with no constrain on the consumer side). Proposing menus helps signaling useful information to consumers and therefore adjusting consumption to traffic cost. In the case of menus, we show that optimal mechanisms consist in letting the content producers choose between different categories associated with different prices for content and consumers. Our results are robust to competition between ISPs and to competition between contents. We also show that when (competitive) content providers choose at small cost between a pay and a free business model, a price-cap at cost on the price for content improves efficiency.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 735.
Date of creation: Jun 2012
Date of revision: Feb 2014
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Other versions of this item:
- Jullien, Bruno & Sand-Zantman, Wilfried, 2012. "Pricing Internet Traffic: Exclusion, Signalling and Screening," TSE Working Papers 12-327, Toulouse School of Economics (TSE), revised Feb 2014.
- Bruno Jullien & Wilfried Sand-Zantman, 2014. "Pricing Internet Traffic: Exclusion, Signalling and Screening," CESifo Working Paper Series 4709, CESifo Group Munich.
- D00 - Microeconomics - - General - - - General
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