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Internet peering as a network of relations

  • Lippert, Steffen
  • Spagnolo, Giancarlo

This paper applies results from recent theoretical work on networks of relations to analyze optimal peering strategies for asymmetric Internet Service Providers (ISPs). From a network of relations perspective, ISPs' asymmetry in bilateral peering agreements need not be a problem, since when these form a closed network, asymmetries are pooled and information transmission is faster. Both these effects reduce the incentives for opportunism in general, and interconnection quality degradation in particular. The paper also explains why bilateral monetary transfers between asymmetric ISPs (Bilateral Paid Peering), though potentially good for bilateral peering, may have negative effects on the sustainability of the overall peering network.

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Article provided by Elsevier in its journal Telecommunications Policy.

Volume (Year): 32 (2008)
Issue (Month): 1 (February)
Pages: 33-49

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Handle: RePEc:eee:telpol:v:32:y:2008:i:1:p:33-49
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  1. Lippert, Steffen & Spagnolo, Giancarlo, 2005. "Networks of Relations and Social Capital," CEPR Discussion Papers 5078, C.E.P.R. Discussion Papers.
  2. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
  3. Jean-Jacques Laffont, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," Theory workshop papers 357966000000000085, UCLA Department of Economics.
  4. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA.
  5. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  6. Stanley Besen, 2001. "Advances in Routing Technologies and Internet Peering Agreements," American Economic Review, American Economic Association, vol. 91(2), pages 292-296, May.
  7. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  8. Lippert, Steffen & Spagnolo, Giancarlo, 2004. "Networks of Relations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 28, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Cremer, Jacques & Rey, Patrick & Tirole, Jean, 2000. "Connectivity in the Commercial Internet," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 433-72, December.
  10. Jean-Jacques Laffont, 2001. "Internet Peering," American Economic Review, American Economic Association, vol. 91(2), pages 287-291, May.
  11. Thorsten Wichmann & Pio Baake, 1998. "On the Economics of Internet Peering," Berlecon Research Papers 0004, Berlecon Research.
  12. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  13. Giovannetti, E. & Neuhoff, K. & Spagnolo, G., 2005. "Agglomeration in Internet Co-operation Peering Agreements," Cambridge Working Papers in Economics 0505, Faculty of Economics, University of Cambridge.
  14. Giovannetti, E. & Ristuccia, C.A., 2003. "Estimating Market Power in the Internet Backbone Using Band-X data," Cambridge Working Papers in Economics 0332, Faculty of Economics, University of Cambridge.
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