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Pricing and Efficiency in the Market for IP Addresses


  • Benjamin Edelman

    () (Harvard Business School, Negotiation, Organizations & Markets Unit)

  • Michael Schwarz

    () (Yahoo! Research Labs)


We consider market rules for transferring IP addresses, numeric identifiers required by all computers connected to the Internet. Transfers usefully move resources from lowest to highest-valuation networks, but transfers tend to cause socially costly growth in the Internet's routing table. We propose a market rule that avoids excessive trading and comes close to achieving social efficiency. We argue that this rule is feasible despite the limited powers of central authorities. We also offer a framework for reasoning about future prices of IP addresses, then explore the role of rentals in sharing information about the value of IP address and assuring allocative efficiency.

Suggested Citation

  • Benjamin Edelman & Michael Schwarz, 2011. "Pricing and Efficiency in the Market for IP Addresses," Harvard Business School Working Papers 12-020, Harvard Business School, revised Apr 2014.
  • Handle: RePEc:hbs:wpaper:12-020

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    References listed on IDEAS

    1. Atila Abdulkadiro─člu & Parag A. Pathak & Alvin E. Roth, 2005. "The New York City High School Match," American Economic Review, American Economic Association, vol. 95(2), pages 364-367, May.
    2. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
    3. Peter Cramton & John McMillan & Paul Milgrom & Bradley Miller & Bridger Mitchell & Daniel Vincent & Robert Wilson, 1998. "Simultaneous Ascending Auctions with Package Bidding," Papers of Peter Cramton 98cra2, University of Maryland, Department of Economics - Peter Cramton.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. A market for IP addresses
      by Economic Logician in Economic Logic on 2011-10-25 19:24:00

    More about this item


    market design; externalities; Internet; intermediaries;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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