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Towards Sustainable Quality Of Service In Interconnection

  • Ioanna D. Constantiou

    (eLTRUN-Athens University of Economics and Business)

  • Nikolaos A. Mylonopoulos

    (Athens Laboratory of Business Administration)

This paper analyses the structure of the Internet marketplace and the business relationships of key players involved in network services provision. A brief overview of existing pricing policies and research work in this area is presented and some new issues are introduced. We believe that the role of information asymmetry is critical when considering agreements for Internet access and interconnection. In negotiation and contract preparation, information asymmetry gives rise to adverse selection. The current structure of connectivity agreements does not address information asymmetries thus allowing the possibility of opportunistic behaviour in the form of moral hazard. Inasmuch as interconnection agreements involve sharing and/or exchanging network resources, either party will tend to exploit the agreement to its own advantage (i.e. conserving its own resources) and, possibly, to the detriment of the other (i.e. overutilising the other’s resources). The discussion focuses on interconnection agreements between Internet Service Providers, namely peering and transit. The paper concludes with an outline of an incentive compatible mechanism that can sustain quality of service requirements in interconnection agreements.

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File URL: http://econwpa.repec.org/eps/game/papers/0207/0207004.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0207004.

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Length: 12 pages
Date of creation: 21 Aug 2002
Date of revision: 02 Sep 2002
Handle: RePEc:wpa:wuwpga:0207004
Note: Type of Document - pdf; prepared on PC; pages: 12; figures: included. Published in the Proceedings of ECIS 2001, Bled Slovenia
Contact details of provider: Web page: http://econwpa.repec.org

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  1. MacKie-Mason, J.K. & Varian, H.L., 1993. "Some Economists of the Internet," Papers 93-16, Michigan - Center for Research on Economic & Social Theory.
  2. Yannis Bakos & Erik Brynjolfsson, 1999. "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, INFORMS, vol. 45(12), pages 1613-1630, December.
  3. Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243273.
  4. Alok Gupta & Dale O. Stahl, 1996. "A Stochastic Equilibrium Model of Internet Pricing," CARE Working Papers 9604, The University of Texas at Austin, Center for Applied Research in Economics.
  5. Mackie-Mason, J.K. & Varian, H.R., 1993. "Pricing the Internet," Memorandum 20/1993, Oslo University, Department of Economics.
  6. Crémer, Jacques & Rey, Patrick & Tirole, Jean, 1999. "Connectivity in the Commercial Internet," IDEI Working Papers 87, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2000.
  7. Pio Baake & Thorsten Wichmann, 1999. "On the economics of Internet peering," Netnomics, Springer, vol. 1(1), pages 89-105, October.
  8. Cremer, Jacques & Hariton, Cyril, 1999. "The Pricing of Critical Applications in the Internet," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 281-310, December.
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