Fair cost sharing: big tech vs telcos

Bruno Jullien and Matthieu Bouvard
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Bruno Jullien: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique
Matthieu Bouvard: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse

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Abstract: We study a cost-sharing mechanism where a content provider contributes to covering the costs incurred by a network operator when delivering content to consumers. The costshare not only boosts the content provider's incentives to moderate trac but also aects the price composition for consumers buying access and content. We show the overalleect on consumer welfare depends on the content provider's ability to monetize users. When that ability is high, introducing a cost-share can lead to lower overall prices and higher consumer welfare. We study the robustness of this result to long-term investments in cost reduction by the operator and to heterogeneity in consumers' taste for content. In extensions with multiple contents and multiple operators, contractual externalities arise that suggest a role for regulation.

Date: 2022-10-28
New Economics Papers: this item is included in nep-cta, nep-gth, nep-mic and nep-pay
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