Intra-backbone and Inter-backbone Peering Among Internet Service Providers
We consider a model with two backbones and a finite number of Internet Service Providers (ISPs) connected to the backbones. ISPs decide on private peering agreements, comparing the benefits of private peering to costs. Intra-backbone peering refers to peering between ISPs connected to the same backbone, whereas inter-backbone peering refers to peering between ISPs connected to different backbones. We formulate the model as a two-stage game. In the first stage, ISPs decide on peering agreements. In the second stage they compete in prices a la Bertrand. We examine the effects of peering on profits of ISPs. Peering affects profits through two channels - reduction of backbone congestion which we call the symmetric effect and ability to send traffic bypassing or circumventing congested backbones which we call the asymmetric effect. The first has a negative or ambiguous effect while the second has a generally positive effect on firm profits. The two often act against each other making the net effect ambiguous. We also conduct simulations to determine pairwise stable peering configurations in a six-provider model and find that there is a paucity of inter-backbone peering in asymmetric settings.
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.:
- Narine Badasyan & Subhadip Chakrabarti, 2003.
"Private Peering Among Internet Backbone Providers,"
0301002, EconWPA, revised 20 Jan 2003.
- Nicholas Economides, 1997.
"The Economics of Networks,"
Brazilian Electronic Journal of Economics,
Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
- Cremer, Jacques & Rey, Patrick & Tirole, Jean, 2000.
"Connectivity in the Commercial Internet,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 48(4), pages 433-72, December.
- Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2003.
" Internet Interconnection and the Off-Net-Cost Pricing Principle,"
RAND Journal of Economics,
The RAND Corporation, vol. 34(2), pages 370-90, Summer.
- Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," IDEI Working Papers 130, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Jacques Laffont, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," Theory workshop papers 357966000000000085, UCLA Department of Economics.
- Jackson, Matthew O. & Wolinsky, Asher, 1996.
"A Strategic Model of Social and Economic Networks,"
Journal of Economic Theory,
Elsevier, vol. 71(1), pages 44-74, October.
- Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Mason, Robin, 2000. "Simple competitive Internet pricing," European Economic Review, Elsevier, vol. 44(4-6), pages 1045-1056, May.
- R. Gibbens & R. Mason & Richard Steinberg, 2000. "Internet service classes under competition," LSE Research Online Documents on Economics 23577, London School of Economics and Political Science, LSE Library.
- Goyal, S. & Joshi, S., 2000.
"Networks of Collaboration in Oligopoly,"
Econometric Institute Research Papers
EI 9952-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- André DE PALMA & Luc LERUTH, 1989. "Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities," Annales d'Economie et de Statistique, ENSAE, issue 15-16, pages 389-407.
- Jeffrey K. MacKie-Mason & Hal R. Varian, 1994.
"Pricing the Internet,"
- Sumit Joshi, 2000.
"Networks of Collaboration in Oligopoly,"
Econometric Society World Congress 2000 Contributed Papers
0623, Econometric Society.
- Little, Iain & Wright, Julian, 2000. "Peering and Settlement in the Internet: An Economic Analysis," Journal of Regulatory Economics, Springer, vol. 18(2), pages 151-73, September.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0407006. 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: (EconWPA)
If references are entirely missing, you can add them using this form.