Private Peering Among Internet Backbone Providers

Narine Badasyan and Subhadip Chakrabarti
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Narine Badasyan: Virginia Tech
Subhadip Chakrabarti: Virginia Tech

Industrial Organization from EconWPA

Abstract: We develop a model, in which Internet backbone providers decide on private peering agreements, comparing the benefits of private peering relative to being connected only through National Access Points. Backbone providers compete by setting capacities for their networks, capacities on the private peering links, if they choose to peer privately, and access prices. The model is formulated as a multistage game. We examine the model from two alternative modelling perspectives - a purely non-cooperative game, where we solve for Subgame Perfect Nash Equilibria through backward induction, and a network theoretic perspective, where we examine pairwise stable and efficient networks. While there are a large number of Subgame Perfect Nash Equilibria, both the pairwise stable and the efficient network are unique and the stable network is not efficient and vice versa. The stable network is the complete network, where all the backbone providers choose to peer with each other, while the efficient network is the one, where the backbone providers are connected to each other only through the National Access Points.

Keywords: Subgame perfect Nash equilibrium; networks; pairwise stability; efficiency (search for similar items in EconPapers)
JEL-codes: D21 D43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-net
Date: 2003-01-20, Revised 2003-01-20
Note: Type of Document - Tex; prepared on IBM PC ; to print on HP;
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0301002

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