Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 890: Network Neutrality and Network Management Regulation: Quality of Service, Price Discrimination, and Exclusive Contracts

Nicholas Economides and Joacim Tåg ()
Additional contact information
Nicholas Economides: Stern School of Business, Postal: New York University
Joacim Tåg: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: We compare four approaches to network neutrality and network management regulation in a two-sided market model: (i) no variations in Quality of Service and no price discrimination; (ii) variations in Quality of Service but no price discrimination; (iii) variations in Quality of Service and price discrimination but no exclusive contracts; and (iv) no regulation: the network operator can sell exclusive rights to content providers. We compare the equilibrium outcomes explicitly accounting for dynamic incentives to invest in improving the Quality of Service offered to each content provider. We provide a ranking Quality of Service and network operator profits across regimes.

Keywords: Network neutrality; Internet price discrimination; Exclusivity; Quality of Service; Network management; Congestion; AT&T; Verizon; Google

JEL-codes: C63; D40; D42; D43; L10; L12; L13

28 pages, December 5, 2011

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