Game-theoretic analysis of Net Neutrality effects

Mikhail Taipov ()
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Mikhail Taipov: Department of Economics, Lomonosov Moscow State University

No 54, Working Papers from Moscow State University, Faculty of Economics

Abstract: Net Neutrality imposes many restrictions on the work of Internet service providers, which can significantly affect their profits and the welfare of other economic agents in the ISP market. This article analyzes the following rules established by the Net Neutrality: “zero price” rule and the prohibition of exclusive deals between ISPs and content providers. To study the implications of Net Neutrality, a game-theoretic model of the ISP market is being created, the unique feature of which is that content providers are divided into two following types: one large content provider that creates a large cross-network effect for consumers and is able to strike exclusive deals with ISPs in the absence of Net Neutrality; and many small content providers that create a small crossnetwork effect and aren’t able to influence the prices set by ISPs. This model allowed me to draw the following conclusions about the effects of Net Neutrality: Net Neutrality increases the profits of Internet service providers and reduces the profits of a large content provider; increases the total social welfare if a large content provider joins both ISPs in the absence of Net Neutrality. The impact of net neutrality on consumer surplus and profits of small content providers depends on the exclusivity of a large content provider in the absence of net neutrality.

Keywords: net Neutrality; content providers; exclusivity; platforms; social welfare (search for similar items in EconPapers)
JEL-codes: C65 C79 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2023-05
New Economics Papers: this item is included in nep-com, nep-des, nep-gth, nep-mic, nep-net, nep-pay and nep-reg
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