Interconnection, Differentiation and Bottlenecks in the Internet
In the Internet information packets are routed through many vertically related hops. However these network hierarchies are not fixed. Two providers can be simultaneously vertically related in a routing process as supplier and retailer, while horizontally competing in another. We study pricing and interconnection decisions when ISPs become interconnected into a wider network. We find that interconnection lowers retail and access prices when the downstream industry is poorly differentiated. The profitability of interconnection also depends on the differentiation of the retail sector. Interconnection is, however, universally agreed upon for an intermediate range of retail services differentiation values.
|Date of creation:||Nov 2000|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.cam.ac.uk/index.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicholas S. Economides & Glenn A. Woroch, 1994.
"Benefits and Pitfalls of Network Interconnection,"
- Valletti, Tommaso M. & Estache, Antonio, 1999.
"The theory of access pricing : an overview for infrastructure regulators,"
Policy Research Working Paper Series
2097, The World Bank.
- Estache, Antonio & Valletti, Tommaso, 1999. "The Theory of Access Pricing: an Overview for Infrastructure Regulators," CEPR Discussion Papers 2133, C.E.P.R. Discussion Papers.
- Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
- Armstrong, M. & Doyle, C. & Vickers, J., 1995.
"The access pricing problem: a synthesis,"
Discussion Paper Series In Economics And Econometrics
9532, Economics Division, School of Social Sciences, University of Southampton.
- Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
- Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
- Mackie-Mason, J.K. & Varian, H.R., 1993.
"Pricing the Internet,"
20/1993, Oslo University, Department of Economics.
- Economides, Nicholas, 1999.
"The Telecommunications Act of 1996 and its impact1,"
Japan and the World Economy,
Elsevier, vol. 11(4), pages 455-483, December.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
- Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
When requesting a correction, please mention this item's handle: RePEc:cam:camdae:0011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb)
If references are entirely missing, you can add them using this form.