Scandinavian Working Papers in Economics

Discussion Papers on Economics,
University of Southern Denmark, Department of Economics

No 11/2015: Strategic Investment Dependence and Net Neutrality

Martin Nielsen ()
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Martin Nielsen: Department of Business and Economics, Postal: University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark

Abstract: This paper analyzes the way payments by content providers to an Internet service provider may affect investment in Internet speed and content quality. It derives payment mechanisms capable of aligning investment incentives between the two groups; in fact, some of them are Pareto-improving also for consumers, who are willing to pay for quality of content. On the other hand, some parameter combinations may require public intervention for Pareto improvement to be attained.

Keywords: Internet regulation; Network neutrality; Investment incentives; Monopoly; Duopoly; Regulation; Internet content; Netflix; Internet service providers; AT&T; Verizon; Comcast

JEL-codes: C72; D42; D43; L12; L13; L14

18 pages, June 29, 2015

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