Internet service classes under competition


Gibbens, R., Mason, R.A. and Steinberg, R. (2000) Internet service classes under competition. IEEE Journal on Selected Areas in Communications, 18, (12), 2490-2498. (doi:10.1109/49.898732).

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Original Publication URL: http://dx.doi.org/10.1109/49.898732

Description/Abstract

This paper analyzes competition between two Internet service providers (ISPs), either or both of which may choose to offer multiple service classes. In the model analyzed, a social planner who maximizes the total benefit from network usage and a profit maximizing monopolist will both form multiple service classes; but two networks competing to maximize profits will not. The reason is that a competition effect always outweighs a segmentation effect. Networks wish to offer multiple service classes in order to increase user benefits and hence charge higher prices. In doing so, however, they effectively increase the number of points in the service quality range at which they compete. Consequently, in any equilibrium competitive outcome, both ISPs offer a single service class. The analysis has particular implications for the Paris Metro pricing (PMP) proposal, which is considered in depth in this paper, since it suggests that PMP may not be viable under competition

Item Type: Article
Related URLs:
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HA Statistics
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33005
Date Deposited: 19 Jul 2006
Last Modified: 27 Mar 2014 18:20
Contact Email Address: ram2@soton.ac.uk
URI: http://eprints.soton.ac.uk/id/eprint/33005

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