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A result similar to the Odlyzko's "Paris Metro Pricing"
[journal article]
Abstract We investigate the two-stage competition in which two Internet
Service Providers chosse sequentially their capacities and
then their prices while facing a flow of new customers who decide
to belong to one ISP or the other on the basis of a comparison
of access prices and of expected congestion rates... view more
We investigate the two-stage competition in which two Internet
Service Providers chosse sequentially their capacities and
then their prices while facing a flow of new customers who decide
to belong to one ISP or the other on the basis of a comparison
of access prices and of expected congestion rates. At the
equilibrium of the game a vertical differentiation between the Internet
Service Providers endogenously emerges: the firm which
provides the larger network has the lowest rate of congestion and
the highest access price. The I.S.P providing the smallest network
(thus the most congested) earns the larger profit. It will
be noticed that the spontaneous functioning of oligopolistic competition
produces a result similar to the Odlyzko's "Paris Metro
Pricing": at the equilibrium the two competitors propose different
prices and rates of congestion, the most expensive one being
also the least congested.... view less
Classification
Economic Sectors
Business Administration
Free Keywords
Congestion; Internet Service Providers
Document language
English
Publication Year
2006
Page/Pages
p. 1821-1824
Journal
Applied Economics, 38 (2006) 15
DOI
https://doi.org/10.1080/00036840500426967
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)