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|
References listed on IDEAS
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.:
- 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.
- Nicholas Economides, 1998.
"The Telecommunication Act of 1996 and its Impact,"
98-08, New York University, Leonard N. Stern School of Business, 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.
- Nicholas S. Economides & Glenn A. Woroch, 1992.
"Benefits and Pitfalls of Network Interconnection,"
92-31, New York University, Leonard N. Stern School of Business, Department of Economics.
- Mackie-Mason, J.K. & Varian, H.R., 1993.
"Pricing the Internet,"
20/1993, Oslo University, Department of Economics.
- Armstrong, Mark & Doyle, Chris & Vickers, John, 1996.
"The Access Pricing Problem: A Synthesis,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 44(2), pages 131-50, June.
- 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.
- 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., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
- 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.
- 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.
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: (Jake Dyer)
If references are entirely missing, you can add them using this form.