We analyze competition between interconnected networks when content is heterogeneous in its sensitivity to delivery quality. In a two-sided market framework, we characterize the equilibrium in a neutral network constrained to offer the same quality and assess the impact of such a constraint vis-à-vis a non-neutral network where Internet service providers (ISPs) are allowed to engage in second degree price discrimination with a menu of quality-price pairs. We find that the merit of net neutrality regulation depends crucially on content providers' business models. More generally, our analysis can be considered as a contribution to the literature on second-degree price discrimination in two-sided platform markets.
- D4: Market Structure and Pricing
- L1: Market Structure, Firm Strategy, and Market Performance
- L5: Regulation and Industrial Policy
Jay Pil Choi, Doh-Shin Jeon, and Byung-Cheol Kim, “Net Neutrality, Business Models, and Internet Interconnection”, American Economic Journal: Microeconomics, vol. 7, n. 3, 2015, pp. 103–141.