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Net Neutrality and Investment Incentives

By Jay Pil Choi and Byung-cheol Kim

Abstract

This paper analyzes the effects of net neutrality regulation on investment incentives for Internet service providers (ISPs) and content providers (CPs), and their implications for social welfare. Concerning the ISP’s investment incentives, we find that capacity expansion decreases the sale price of the priority right under the discriminatory regime. Thus, contrary to ISPs ’ claims that net neutrality regulations would have a chilling effect on their incentive to invest, we cannot dismiss the possibility of the opposite. A discriminatory regime can also weaken CPs’ investment incentives because of CPs’ concern that the ISP would expropriate some of the investment benefits

Topics: Key Words, Net Neutrality, Investment (Innovation) Incentives, Queuing Theory, Hold-up Problem, Two-sided Markets, Vertical Integration
Year: 2010
OAI identifier: oai:CiteSeerX.psu:10.1.1.184.7642
Provided by: CiteSeerX
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