The Bucket Brigade Pricing And Network Externalities In Peer-To-Peer Communications Networks
This Paper analyzes the pric ing of transit traffic in wireless peer-to-peer networks using the concepts of direct and indirect network externalities. We first establish that without any pricing mechanism, congestion externalities overwhelm other network effects in a wireless data network. We show that peering technology will mitigate the congestion and allow users to take advantage of more the positive network externalities. However, without pricing, the peering equilibrium breaks down just like a bucket brigade made up of free-riding agents. With pricing and perfect competition, a peering equilibrium is possible and allows many more users on the network at the same time. However, the congestion externality is still a problem, so peering organized through a club may be the best solution.
|Date of creation:||Oct 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.wesleyan.edu/econ/
More information through EDIRC
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 & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-23, March.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Nicholas Economides & Fredrick Flyer, 1997. "Compatibility and Market Structure for Network Goods," Working Papers 98-02, New York University, Leonard N. Stern School of Business, Department of Economics.
- S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
- Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
When requesting a correction, please mention this item's handle: RePEc:wes:weswpa:2001-001. 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: (Manolis Kaparakis)
If references are entirely missing, you can add them using this form.