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The Strategic Use of Download Limits by a Monopoly Platform

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  • Nicholas Economides
  • Benjamin Hermalin

Abstract

type="main"> We offer a new explanation for why platforms, such as Internet service providers and mobile-phone networks, offer plans with download limits: through one of two mechanisms, doing so causes content providers to reduce prices or improve quality. This generates greater surplus for consumers, which a platform captures via higher consumer access fees. Even accounting for congestion externalities, a platform limits downloads more than would be welfare maximizing; indeed, by so much, that barring such practices can be welfare superior to what a platform would do. Paradoxically, a platform will install more bandwidth when it can restrict downloads than when it cannot.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Nicholas Economides & Benjamin Hermalin, 2014. "The Strategic Use of Download Limits by a Monopoly Platform," Working Papers 14-06, New York University, Leonard N. Stern School of Business, Department of Economics.
    • Handle: RePEc:ste:nystbu:14-06
    as

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    File URL: https://www.stern.nyu.edu/networks/Economides_Hermalin_Congested_Platform.pdf
    Download Restriction: no
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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