Fear of Discrimination: Net Neutrality and Product Differentiation on the Internet

Liu Xingyi ()
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Liu Xingyi: Universität Würzburg, Sanderring 2, 97070 Würzburg, Germany

Review of Network Economics, 2016, vol. 15, issue 4, 211-247

Abstract: We study the impact of net neutrality on the content market with endogenous product differentiation. We show that when the Internet service provider is allowed to offer different connection qualities to content providers, it has incentives to favor contents that have a broader market feature. This biases content providers towards choosing those broader products, which may result in too little product differentiation in the content market. By eliminating the possibility of discrimination, net neutrality can reduce such distortion in the content market, and induce more efficient product choices. Net neutrality also raises social welfare if the extent of discrimination is relatively small compared to the extent of product differentiation.

Keywords: Net Neutrality; Product Differentiation; Quality Discrimination (search for similar items in EconPapers)
JEL-codes: D4 L1 L52 L86 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/rne-2017-0010

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