IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Net Neutrality and Investment Incentives

  • Jay Pil Choi
  • Byung-Cheol Kim

This paper analyzes the effects of net neutrality regulation on investment incentives for Internet service providers (ISPs) and content providers (CPs), and their implications for social welfare. We show that the ISP’s decision on the introduction of discrimination across content depends on a potential trade-off between network access fee and the revenue from the trade of the first-priority. Concerning the ISP’s investment incentives, we find that capacity expansion affects the sale price of the priority right under the discriminatory regime. Because the relative merit of the first priority, and thus its value, becomes relatively small for higher capacity levels, the ISP’s incentive to invest on capacity under a discriminatory network can be smaller than that under a neutral regime where such rent extraction effects do not exist. Contrary to ISPs’ claims that net neutrality regulations would have a chilling effect on their incentive to invest, we cannot dismiss the possibility of the opposite.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-09/cesifo1_wp2390.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2390.

as
in new window

Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:ces:ceswps:_2390
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
Email:


More information through EDIRC

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.:

as in new window
  1. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  2. Choi, J.P., 1992. "Optimal Tariffs and the Choice of Technology Discriminatory Tariffs vs. the "Most Favored Nation" Clause," Discussion Papers 1992_46, Columbia University, Department of Economics.
  3. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  4. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
  5. Lawrence J. White, 2007. "Reducing Barriers to Services Trade: The U.S. Case," Working Papers 07-8, New York University, Leonard N. Stern School of Business, Department of Economics.
  6. Jong-Hee Hahn, 2002. "Damaged Durable Goods," Keele Economics Research Papers KERP 2002/21, Centre for Economic Research, Keele University.
  7. Economides, Nicholas & Tåg, Joacim, 2008. "Network Neutrality on the Internet: A Two-sided Market Analysis," Working Paper Series 727, Research Institute of Industrial Economics, revised 09 Nov 2011.
  8. Deneckere, R. & McAfee, R.P., 1995. "Damaged Goods," Working papers 9508, Wisconsin Madison - Social Systems.
  9. Cambini, Carlo & Valletti, Tommaso, 2003. "Investments and Network Competition," CEPR Discussion Papers 3829, C.E.P.R. Discussion Papers.
  10. Naor, P, 1969. "The Regulation of Queue Size by Levying Tolls," Econometrica, Econometric Society, vol. 37(1), pages 15-24, January.
  11. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
  12. Edelson, Noel M & Hildebrand, David K, 1975. "Congestion Tolls for Poisson Queuing Processes," Econometrica, Econometric Society, vol. 43(1), pages 81-92, January.
  13. repec:rje:randje:v:37:y:2006:1:p:121-133 is not listed on IDEAS
  14. K. R. Balachandran, 1972. "Purchasing Priorities in Queues," Management Science, INFORMS, vol. 18(5-Part-1), pages 319-326, January.
  15. Viktória Kocsis & Paul Bijl, 2007. "Network neutrality and the nature of competition between network operators," International Economics and Economic Policy, Springer, vol. 4(2), pages 159-184, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2390. 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: (Julio Saavedra)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.