The Strategic Use of Download Limits by a Monopoly Platform
AbstractWe consider a heretofore unexplored explanation for why platforms, such as Internet service providers, might impose download limits on content consumers: doing so increases the degree to which those consumers view content providersâ products as substitutes. This, in turn, intensifies the competition among providers, generating greater surplus for consumers. A platform, in turn, can capture this increased surplus by charging consumers higher access fees. Even accounting for congestion externalities, we show that a platform will tend to set the download limit at a lower level than would be welfare-maximizing; indeed, in some instances, so low that no download limit is welfare superior to the limit the platform would set. Somewhat paradoxically, we show that a platform will install more bandwidth when allowed to impose a download limit than when prevented from doing so. Other related phenomena are explored.
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Bibliographic InfoPaper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 14-06.
Date of creation: 2014
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Other versions of this item:
- Nicholas Economides & Benjamin Hermalin, 2013. "The Strategic Use of Download Limits by a Monopoly Platform," Working Papers 13-26, NET Institute.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- D4 - Microeconomics - - Market Structure and Pricing
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-15 (All new papers)
- NEP-COM-2014-02-15 (Industrial Competition)
- NEP-MIC-2014-02-15 (Microeconomics)
- NEP-MKT-2014-02-15 (Marketing)
- NEP-SOG-2014-02-15 (Sociology of Economics)
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