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Private Peering Among Internet Backbone Providers

Author

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  • Narine Badasyan

    (Virginia Tech)

  • Subhadip Chakrabarti

    (Virginia Tech)

Abstract

We develop a model, in which Internet backbone providers decide on private peering agreements, comparing the benefits of private peering relative to being connected only through National Access Points. Backbone providers compete by setting capacities for their networks, capacities on the private peering links, if they choose to peer privately, and access prices. The model is formulated as a multistage game. We examine the model from two alternative modelling perspectives - a purely non-cooperative game, where we solve for Subgame Perfect Nash Equilibria through backward induction, and a network theoretic perspective, where we examine pairwise stable and efficient networks. While there are a large number of Subgame Perfect Nash Equilibria, both the pairwise stable and the efficient network are unique and the stable network is not efficient and vice versa. The stable network is the complete network, where all the backbone providers choose to peer with each other, while the efficient network is the one, where the backbone providers are connected to each other only through the National Access Points.

Suggested Citation

  • Narine Badasyan & Subhadip Chakrabarti, 2003. "Private Peering Among Internet Backbone Providers," Industrial Organization 0301002, University Library of Munich, Germany, revised 20 Jan 2003.
  • Handle: RePEc:wpa:wuwpio:0301002
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    References listed on IDEAS

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    Cited by:

    1. Laura Ferrari Bravo & Paolo Siciliani, 2007. "Exclusionary Pricing And Consumers Harm: The European Commission'S Practice In The Dsl Market," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 243-279.
    2. D'Ignazio, Alessio & Giovannetti, Emanuele, 2009. "Asymmetry and discrimination in Internet peering: evidence from the LINX," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 441-448, May.
    3. Narine Badasyan & Subhadip Chakrabarti, 2004. "Intra-backbone and Inter-backbone Peering Among Internet Service Providers," Industrial Organization 0407004, University Library of Munich, Germany.
    4. Sgroi, D., 2006. "Social Network Theory, Broadband and the World Wide Web," Cambridge Working Papers in Economics 0603, Faculty of Economics, University of Cambridge.
    5. Alessio D'Ignazio & Emanuele Giovannetti, 2006. "From Exogenous To Endogenous Economic Networks: Internet Applications," Journal of Economic Surveys, Wiley Blackwell, vol. 20(5), pages 757-796, December.
    6. D’Ignazio, A. & Giovannetti, E., 2006. "‘Unfair’ Discrimination in Two-sided Peering? Evidence from LINX," Cambridge Working Papers in Economics 0621, Faculty of Economics, University of Cambridge.
    7. D'Ignazio, A. & Giovannetti, E., 2004. "From Exogenous to Endogenous Networks: Internet Applications," Cambridge Working Papers in Economics 0445, Faculty of Economics, University of Cambridge.

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    More about this item

    Keywords

    Subgame perfect Nash equilibrium; networks; pairwise stability; efficiency;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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