Game Theory for Networks. 2nd International ICST Conference, GAMENETS 2011, Shanghai, China, April 16-18, 2011, Revised Selected Papers

Research Article

Network Regulations and Market Entry

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  • @INPROCEEDINGS{10.1007/978-3-642-30373-9_8,
        author={Galina Schwartz and John Musacchio and Mark Felegyhazi and Jean Walrand},
        title={Network Regulations and Market Entry},
        proceedings={Game Theory for Networks. 2nd International ICST Conference, GAMENETS 2011, Shanghai, China, April 16-18, 2011, Revised Selected Papers},
        proceedings_a={GAMENETS},
        year={2012},
        month={10},
        keywords={network neutrality two-sided markets market entry},
        doi={10.1007/978-3-642-30373-9_8}
    }
    
  • Galina Schwartz
    John Musacchio
    Mark Felegyhazi
    Jean Walrand
    Year: 2012
    Network Regulations and Market Entry
    GAMENETS
    Springer
    DOI: 10.1007/978-3-642-30373-9_8
Galina Schwartz1,*, John Musacchio1,*, Mark Felegyhazi2,*, Jean Walrand1,*
  • 1: University of California
  • 2: Budapest Univ. of Tech. and Econ.
*Contact email: schwartz@eecs.berkeley.edu, johnm@soe.ucsc.edu, mfelegyhazi@crysys.hu, wlr@eecs.berkeley.edu

Abstract

This paper uses a two-sided market model to study if last-mile access providers (ISPs), should charge content providers (CPs), who derive revenue from advertisers, for the right to access ISP’s end-users. We compare two-sided pricing (ISPs could charge CPs for content delivery) with one-sided pricing (neutrality regulations prohibit such charges). Our analysis indicates that number of CPs is lower, and the number of ISPs often higher, with two- rather than one-sided pricing. From our results the superiority of one regime over the other depends on parameters of advertising rates, end-user demand, CPs’ and ISPs’ costs, and relative importance of their investments. Thus, caution should be taken in designing neutrality regulations.