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on Network Economics |
| By: | Adam Copeland; Adam Hale Shapiro |
| Abstract: | We study the effect of market structure on a personal computer manufacturer’s decision to adopt new technology. This industry is unusual because there exist two horizontally segmented retail markets with different degrees of competition: the IBM-compatible (or PC) platform and the Apple platform. We first document that, relative to Apple, producers of PCs typically have more frequent technology adoption, shorter product cycles, and steeper price declines over the product cycle. We then develop a parsimonious vintage-capital model that matches the prices and sales of PC and Apple products. The model predicts that competition is the key driver of the rate at which technology is adopted. |
| Keywords: | Computer industry ; Technological innovations ; Competition |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:462&r=net |
| By: | Economides, Nicholas |
| Abstract: | This paper responds to arguments made in filings in the FCC’s broadband openness proceeding (GN Dkt. 09-191) and incorporates data made available since my January 14th filing in that proceeding. Newly available data confirm that there is limited competition in the broadband access marketplace. Contrary to some others’ arguments, wireless broadband access services are unlikely to act as effective economic substitutes for wireline broadband access services (whether offered by telephone companies or cable operators) and instead are likely to act as a complement. Nor will competition in the Internet backbone marketplace constrain broadband providers’ behavior in providing “last mile” broadband access services. The last mile, concentrated market structure, combined with high switching costs, provides last mile broadband network providers with the ability to engage in practices that will reduce social welfare in the absence of open broadband rules. Furthermore, the effect of open broadband rules on broadband provider revenues is likely to be small and can be either positive or negative. Unfortunately, various filings have misstated or mischaracterized the results on the economics of two-sided markets. Contrary to what some have argued, allowing broadband providers to charge third party content providers will not necessarily result in lower prices being charged to residential Internet subscribers. This is true under a robust set of assumptions. Despite some parties’ mischaracterization of the economic literature, price discrimination by broadband providers against third party applications and content providers will reduce societal welfare for numerous reasons. This reduction in societal welfare is especially acute when price discrimination is taken to the extreme of exclusive dealing between broadband providers and content providers. Antitrust and consumer protection laws are insufficient to protect societal welfare in the absence of open broadband rules. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:604&r=net |
| By: | Weisman, Dennis L. |
| Abstract: | The Obama administration came into power championing a philosophical shift in regulatory and antitrust policy. The telecommunications industry was singled out by the administration as a case where past regulatory/antitrust policies may have been too permissive. Prominent policy issues slated for (re)examination include forbearance from network unbundling obligations, net neutrality regulation and prospective market failures in the provision of broadband. The principal objective of this article is to develop a set of competition and regulatory principles, firmly grounded in the law and economics literature, that can serve to inform the design of the optimal public policy for the telecommunications sector. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:603&r=net |
| By: | Benkler, Yochai |
| Abstract: | Fostering the development of a ubiquitously networked society, connected over high-capacity networks, is a widely shared goal among both developed and developing countries. High capacity networks are seen as strategic infrastructure, intended to contribute to high and sustainable economic growth and to core aspects of human development. |
| Keywords: | Technology and Industry |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:8&r=net |
| By: | Kavitha Ranganathan; Vikramaditya Shekhar |
| Abstract: | This paper proposes a rating based scheme for encouraging user participation in adhoc mobile phone mesh networks. These networks are particularly attractive for remote/rural areas in developing countries as they do not depend on costly infrastructure and telecom operators. We evaluate our scheme using extensive simulations and find that our proposed scheme is successful in enhancing the network throughput. [W.P. No. 2009-08-01] |
| Keywords: | rating, encouraging, participation, mobile phone, infrastructure, telecom |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2745&r=net |
| By: | Vivek Sakhrani; John E. Parsons |
| Abstract: | The study is motivated by the question “what is the optimal tariff design?” While we do not offer an answer to this question, we use the different designs in four select countries to illuminate the issues involved in designing electricity network tariffs. Electricity networks are a resource shared by all network users. A tariff design that is clear to network users and well understood by them can help them make efficient decisions. A design that sets up conflicting or perverse incentives results in economic distortions. We find that there are a variety of choices and trade-offs while designing the electricity network tariffs for any electricity system. The tariff design must not only be influenced by the technical and economic characteristics of the system, but also the secondary policy objectives that policy makers wish to achieve, while allowing network companies to recover the costs of building and maintaining the network. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:1008&r=net |
| By: | Yoo, Christopher S. |
| Abstract: | Over the past two decades, the Internet has undergone an extensive re-ordering of its topology that has resulted in increased variation in the price and quality of its services. Innovations such as private peering, multihoming, secondary peering, server farms, and content delivery networks have caused the Internet’s traditionally hierarchical architecture to be replaced by one that is more heterogeneous. Relatedly, network providers have begun to employ an increasingly varied array of business arrangements and pricing. This variation has been interpreted by some as network providers attempting to promote their self interest at the expense of the public. In fact, these changes reflect network providers’ attempts to reduce cost, manage congestion, and maintain quality of service. Current policy proposals to constrain this variation risk harming these beneficial developments. |
| Keywords: | Technology and Industry |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:578&r=net |
| By: | Yoo, Christopher S. |
| Abstract: | This article, written for the inaugural issue of a new journal, analyzes the extent to which the convergence of broadcasting and telephony induced by the digitization of communications technologies is forcing policymakers to rethink their basic approach to regulating these industries. Now that voice and video are becoming available through every transmission technology, policymakers can no longer define the scope of regulatory obligations in terms of the mode of transmission. In addition, jurisdictions that employ separate agencies to regulate broadcasting and telephony must reform their institutional structures to bring both within the ambit of a single regulatory agency. The emergence of intermodal competition will also place pressure on both telephone-style regulation, which protects against monopoly pricing and vertical exclusion, as well as broadcast-style regulation, which focuses on content and ownership structure. It will also force regulators to rethink social policies such as universal service and public broadcasting. At the same time, it is possible that convergence will be incomplete and that end users will maintain more than one network connection, which would reduce the danger of anticompetitive activity and allow policymakers to stop short of forcing every connection to be everything to everyone. Lastly, the increase in traffic volumes associated with the advent of Internet video may require the deployment of multicast protocols, content delivery networks, and more aggressive traffic management, all of which potentially implicate the debate over network neutrality currently taking place in the U.S. This article was published in Communications & Convergence Review 2009, vol. 1, no. 1, pp. 44-55. |
| Keywords: | Technology and Industry |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:571&r=net |
| By: | Economides, Nicholas |
| Abstract: | While some broadband providers have called Internet content and application providers free riders on their infrastructure, this is incorrect and misguided. End-users pay for their residential broadband providers for access to the Internet, and content providers pay their own ISPs for connectivity as well. However, content providers need not pay residential broadband providers’ ISPs in order to reach their customers. This feature of the Internet has been one key factor that has allowed innovation to prosper and kept barriers to entry low, as the network transport market for content and application providers functions relatively efficiently.<br><br>In this paper, I consider the impact of a departure from this current system. I examine the possible impact of last-mile broadband providers’ imposing “termination fees” on third-party content providers or application providers to reach end-users. Broadband providers would engage in paid prioritization arrangements – that is, application and content providers could pay the broadband provider to have their traffic prioritized over competitors’ services. I argue that these arrangements would create inefficiency in the market and harm innovation. Because the last mile access broadband market is concentrated and consumers face switching costs, these concerns are particularly significant.<br><br>Broadband providers insist that imposing these new charges will greatly improve network investment, and thus these charges are beneficial. I argue that this is not the case. Possible higher revenues from discrimination may simply be returned to shareholders and not invested. Additionally, evidence suggests networks invest more under non-discrimination requirements, and paid prioritization schemes would divert money towards managing scarcity instead of expanding capacity. Paid prioritization could even create an incentive for broadband providers to create congestion to increase the price of prioritized service. |
| Keywords: | Technology and Industry |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:21&r=net |
| By: | John Duffy; Huan Xie; Yong-Ju Lee |
| Abstract: | Can a social norm of trust and reciprocity emerge among strangers? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (anonymous community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and whether that information must be provided freely or at some cost. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information. |
| JEL: | C72 C78 C91 C92 L14 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:399&r=net |