Bruno Jullien, and Wilfried Sand-Zantman, “Internet Regulation, Two-Sided Pricing, and Sponsored Data”, TSE Working Paper, n. 12-327, June 2012, revised March 2017.
We consider a network that intermediates traffic between the consumers and providers of free content. We analyze the implications of o¤ering sponsored data plans that allow content providers to pay for traffic on behalf of their consumers. Sponsored data boosts consumption of high-value content, but the network may charge higher prices to consumers for non-sponsored content. The welfare effects of allowing sponsored data depend on the proportion of content targeted and the value of such content. Our analysis is conducted under two-sided prices and under one-sided pricing (only consumers pay), and it is extended to the case of network competition.