IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/131868.html

Dynamic Competition in the Cloud: The Regulation of Egress Fees

Author

Listed:
  • Biglaiser, Gary
  • Crémer, Jacques
  • de Cornière, Alexandre
  • Mantovani, Andrea

Abstract

As cloud computing continues to expand, it has drawn significant attention from policymakers due to concerns over market concentration and potentially controversial practices employed by dominant providers. In this paper, we examine the impact of egress fees, which are imposed on users when switching providers. Using a two-period horizontal differentiated duopoly model, we analyze their effects on firms and society. Our findings reveal that cloud providers have strong incentives to implement egress fees, yet these fees harm users. Regulating egress fees has often been evoked as a solution, ranging from banning them to capping them at the cost of transfer. We find that regulation improves user surplus, but excessive regulation, such as banning such fees, may harm total welfare when providers’ data-transfer costs or users’ operational switching costs are high. We also find that regulation can have opposing effects on societal outcomes: while it may incentivize cloud providers to increase switching costs for users, thereby harming society, it may also stimulate cloud usage, a consideration that may matter in policy environments where increasing cloud adoption is itself an objective.

Suggested Citation

  • Biglaiser, Gary & Crémer, Jacques & de Cornière, Alexandre & Mantovani, Andrea, 2026. "Dynamic Competition in the Cloud: The Regulation of Egress Fees," TSE Working Papers 26-1756, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:131868
    as

    Download full text from publisher

    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2026/wp_tse_1756.pdf
    File Function: Full Text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chengsi Wang & Julian Wright, 2025. "Regulating Platform Fees," Journal of the European Economic Association, European Economic Association, vol. 23(2), pages 746-783.
    2. Bo Li & Subodha Kumar, 2018. "Should You Kill or Embrace Your Competitor: Cloud Service and Competition Strategy," Production and Operations Management, Production and Operations Management Society, vol. 27(5), pages 822-838, May.
    3. Zhuoxin Li & Gang Wang, 2025. "Regulating Powerful Platforms: Evidence from Commission Fee Caps," Information Systems Research, INFORMS, vol. 36(1), pages 126-140, March.
    4. Taylor, Curtis R, 2003. "Supplier Surfing: Competition and Consumer Behavior in Subscription Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 223-246, Summer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lam, W., 2015. "Switching Costs in Two-sided Markets," LIDAM Discussion Papers CORE 2015024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Jing Li & Yulin Zhang, 2021. "More market awareness, more profit? Competitive environments, business expansions, and two‐sided markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(2), pages 249-267, March.
    3. Keith M. Marzilli Ericson, 2014. "Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 38-64, February.
    4. Chiara Canta & Leonardo Madio & Andrea Mantovani & Carlo Reggiani, 2026. "Regulating physicians’ prices in the presence of health platforms," Journal of Regulatory Economics, Springer, vol. 69(1), pages 1-31, December.
    5. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    6. Elias Carroni, 2018. "Behaviour-based price discrimination with cross-group externalities," Journal of Economics, Springer, vol. 125(2), pages 137-157, October.
    7. Asplund, Marcus & Eriksson, Rickard & Strand, Niklas, 2001. "Price Discrimination in Oligopoly: Evidence from Swedish Newspapers," SSE/EFI Working Paper Series in Economics and Finance 468, Stockholm School of Economics, revised 01 Jan 2007.
    8. Doh-Shin Jeon & Domenico Menicucci & Nikrooz Nasr, 2023. "Compatibility Choices, Switching Costs, and Data Portability," American Economic Journal: Microeconomics, American Economic Association, vol. 15(1), pages 30-73, February.
    9. Chen, Jiawei, 2018. "Switching costs and network compatibility," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 1-30.
    10. Ke Rong & D. Daniel Sokol & Di Zhou & Feng Zhu, 2026. "Antitrust Platform Regulation and Entrepreneurship: Evidence from China," Management Science, INFORMS, vol. 72(7), pages 6334-6349, July.
    11. Nelson, Tim & McCracken-Hewson, Eleanor & Whish-Wilson, Patrick & Bashir, Stephanie, 2018. "Price dispersion in Australian retail electricity markets," Energy Economics, Elsevier, vol. 70(C), pages 158-169.
    12. Stefano Colombo, 2018. "Behavior‐ and characteristic‐based price discrimination," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(2), pages 237-250, June.
    13. Li, Hongyong & Qiu, Yuxia & Zhu, Jiantao, 2026. "Optimal dynamic regulatory architectures for riders' non-compliant deliveries: A reputation-triggered game analysis," Journal of Retailing and Consumer Services, Elsevier, vol. 90(C).
    14. Zhijun Yan & Lini Kuang & Liangfei Qiu, 2022. "Prosocial behaviors and economic performance: Evidence from an online mental healthcare platform," Production and Operations Management, Production and Operations Management Society, vol. 31(10), pages 3859-3876, October.
    15. Chen, Yuxin & Zhang, Z. John, 2009. "Dynamic targeted pricing with strategic consumers," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 43-50, January.
    16. Wing Man Wynne Lam, 2017. "Switching Costs in Two-Sided Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 136-182, March.
    17. Gans, Joshua S., 2000. "Network competition and consumer churn," Information Economics and Policy, Elsevier, vol. 12(2), pages 97-109, June.
    18. Andrei Hagiu & Julian Wright, 2023. "Data‐enabled learning, network effects, and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 54(4), pages 638-667, December.
    19. Sen Lin & Bo Li & Antonio Arreola-Risa & Yiwei Huang, 2023. "Optimizing a single-product production-inventory system under constant absolute risk aversion," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 31(3), pages 510-537, October.
    20. Miettinen, Topi & Stenbacka, Rune, 2018. "Strategic short-termism: Implications for the management and acquisition of customer relationships," Journal of Economic Behavior & Organization, Elsevier, vol. 153(C), pages 200-222.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:131868. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.