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Information Revolutions and the Overthrow of Autocratic Regimes

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  • Chris Edmond

Abstract

We discuss the benefits of net neutrality regulation in the context of a 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.

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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 07-26.

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Date of creation: 2007
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Handle: RePEc:ste:nystbu:07-26

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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References

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  1. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  2. Schuett, F., 2010. "Network Neutrality: A Survey of the Economic Literature," Discussion Paper 2010-014, Tilburg University, Tilburg Law and Economic Center.
  3. Jay Pil Choi & Byung-Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471.
  4. Christiaan Hogendorn, 2006. "Broadband Internet: Net Neutrality versus Open Access," Working Papers 2006-09, Center for Network Industries and Infrastructure (CNI).
  5. Amelio, Andrea & Jullien, Bruno, 2007. "Tying and Freebies in Two-Sided Markets," IDEI Working Papers 445, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-72, September.
  7. Nicholas Economides, 2007. "“Net Neutrality,” Non-Discrimination and Digital Distribution of Content Through the Internet," Working Papers 07-03, NET Institute.
  8. Rochet Jean-Charles & Tirole Jean, 2003. "An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-11, June.
  9. M. Keith Chen & Barry J. Nalebuff, 2006. "One-Way Essential Complements," Cowles Foundation Discussion Papers 1588, Cowles Foundation for Research in Economics, Yale University.
  10. Nocke, Volker & Peitz, Martin & Stahl, Konrad O., 2004. "Platform Ownership," CEPR Discussion Papers 4657, C.E.P.R. Discussion Papers.
  11. Nicholas Economides, 2007. "Nonbanks in the Payments System: Vertical Integration Issues," Working Papers 07-06, NET Institute.
  12. repec:reg:wpaper:541 is not listed on IDEAS
  13. Nicholas Economides & Evangelos Katsamakas, 2006. "Two-Sided Competition of Proprietary vs. Open Source Technology Platforms and the Implications for the Software Industry," Management Science, INFORMS, vol. 52(7), pages 1057-1071, July.
  14. Andrei Hagiu, 2009. "Two-Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
  15. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  16. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  17. Nicholas Economides & Benjamin Hermalin, 2010. "The Economics of Network Neutrality," Working Papers 10-25, NET Institute.
  18. Yongmin Chen & Scott J. Savage, 2007. "The Effects Of Competition On The Price For Cable Modem Internet Access," Working Papers 07-13, NET Institute.
  19. Krämer, Jan & Wiewiorra, Lukas, 2009. "Innovation through Discrimination!? A Formal Analysis of the Net Neutrality Debate," MPRA Paper 16655, University Library of Munich, Germany.
  20. Jay Pil Choi, 2007. "Tying in Two-Sided Markets with Multi-Homing," CESifo Working Paper Series 2073, CESifo Group Munich.
  21. Austan Goolsbee, 2006. "The Value of Broadband and the Deadweight Loss of Taxing New Technology," NBER Working Papers 11994, National Bureau of Economic Research, Inc.
  22. Hermalin, Benjamin E & Katz, Michael L, 2006. "The Economics of Product-Line Restrictions With an Application to the Network Neutrality Debate," Competition Policy Center, Working Paper Series qt81r3b7xs, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  23. repec:reg:wpaper:428 is not listed on IDEAS
  24. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
  25. Jan Kraemer & Lukas Wiewiorra, 2010. "Network Neutrality and Congestion Sensitive Content Providers: Implications for Service Innovation, Broadband Investment and Regulation," Working Papers 10-09, NET Institute, revised Sep 2010.
  26. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  27. Nicholas Economides, 2007. "Economics of the Internet," Working Papers 07-1, New York University, Leonard N. Stern School of Business, Department of Economics.
  28. repec:reg:rpubli:428 is not listed on IDEAS
  29. Musacchio John & Schwartz Galina & Walrand Jean, 2009. "A Two-Sided Market Analysis of Provider Investment Incentives with an Application to the Net-Neutrality Issue," Review of Network Economics, De Gruyter, vol. 8(1), pages 1-18, March.
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Citations

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Cited by:
  1. Ingo Vogelsang, 2013. "The Endgame of Telecommunications Policy? A Survey," CESifo Working Paper Series 4545, CESifo Group Munich.
  2. Jay Pil Choi & Byung-Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471.
  3. Caves, Kevin W., 2012. "Modeling the welfare effects of net neutrality regulation: A Comment on Economides and Tåg," Information Economics and Policy, Elsevier, vol. 24(3), pages 288-292.
  4. Pier Luigi Parcu, 2013. "Electronic Communications Regulation in Europe: An Overview of Past and Future Problems," RSCAS Working Papers 2013/92, European University Institute.
  5. Isabel Amigo & Pablo Belzarena & Sandrine Vaton, 2013. "A pricing scheme for QoS in overlay networks based on first-price auctions and reimbursement," Netnomics, Springer, vol. 14(1), pages 69-93, November.
  6. Nicolas Curien, 2013. "Net Neutrality is Imperfect and Should Remain So!," EUI-RSCAS Working Papers 22, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  7. Nicolas Curien, 2013. "Net Neutrality is Imperfect and Should Remain So!," RSCAS Working Papers 2013/22, European University Institute.
  8. Shin, Donghee, 2013. "Governing network neutrality: Public perception and policy capacity," 24th European Regional ITS Conference, Florence 2013 88540, International Telecommunications Society (ITS).
  9. Olga Shurchkov, 2013. "Coordination and learning in dynamic global games: experimental evidence," Experimental Economics, Springer, vol. 16(3), pages 313-334, September.
  10. Antonio Russo & Anna D’Annunzio, 2013. "Network Neutrality, Access to Content and Online Advertising," KOF Working papers 13-344, KOF Swiss Economic Institute, ETH Zurich.
  11. Baranes, Edmond & Poudou, Jean-Christophe, 2011. "Internet access and investment incentives for broadband service providers," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52196, International Telecommunications Society (ITS).
  12. Helmut Dietl & Markus Lang & Panlang Lin, 2012. "Advertising Pricing Models in Media Markets: Lump-Sum versus Per-Consumer Charges," Working Papers 0157, University of Zurich, Institute for Strategy and Business Economics (ISU).
  13. Nicholas Economides & Benjamin E. Hermalin, 2012. "The economics of network neutrality," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 602-629, December.
  14. Chang, Chih-Wei & Lin, Yan-Shu & Ohta, Hiroshi, 2013. "Optimal location in two-sided markets," Economic Modelling, Elsevier, vol. 35(C), pages 743-750.
  15. Duarte Brito & Pedro Pereira & João Vareda, 2013. "Network Neutrality under ISP duopoly: on the ability to assign capacity," CEFAGE-UE Working Papers 2013_19, University of Evora, CEFAGE-UE (Portugal).
  16. Hong Guo & Subhajyoti Bandyopadhyay & Hsing K. Cheng, 2009. "Broadband User Discrimination and the Net Neutrality Debate," Working Papers 09-13, NET Institute, revised Aug 2009.
  17. Robin S. Lee & Tim Wu, 2009. "Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 61-76, Summer.

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