TOWARDS SUSTAINABLE QUALITY OF SERVICE IN INTERCONNECTION

This paper analyses the structure of the Internet marketplace and the business relationships of key players involved in network services provision. A brief overview of existing pricing policies and research work in this area is presented and some new issues are introduced. We believe that the role of information asymmetry is critical when considering agreements for Internet access and interconnection. In negotiation and contract preparation, information asymmetry gives rise to adverse selection. The current structure of connectivity agreements does not address information asymmetries thus allowing the possibility of opportunistic behaviour in the form of moral hazard. Inasmuch as interconnection agreements involve sharing and/or exchanging network resources, either party will tend to exploit the agreement to its own advantage (i.e. conserving its own resources) and, possibly, to the detriment of the other (i.e. overutilising the other’s resources). The discussion focuses on interconnection agreements between Internet Service Providers, namely peering and transit. The paper concludes with an outline of an incentive compatible mechanism that can sustain quality of service requirements in interconnection agreements.interconnection information asymmetry

Marketplace’s incentives to promote a personalized pricing device: does it pay-off to boost consumer disloyalty?

We model a duopoly competition on a marketplace represented by a Hotelling segment of consumers and where firms hold data on these consumers. The firms can decide whether to personalize prices - upon using a costly program owned by the marketplace - or quote costless uniform prices. We suppose one firm holds more experience in data than the other and consequently pays less for the program. On the other hand, the marketplace can distort the consumer preferences from uniform to triangular through ads, i.e. provokes more consumer indifference between the firms (persuasive advertising). We find that the marketplace has a clear incentive to distort consumer preferences when asymmetry in terms of payment for the program is intermediate and the program tariff is high. However, the incentive depends on its beliefs about the firms’ choice when asymmetry is weak and the program tariff is lower. Finally, when the marketplace distorts consumer preferences in the regions where it has an incentive to do so, it harms the firms’ profits while benefits the consumers

Developing Multi-Sided Markets in Dynamic Electronic Commerce Ecosystems - Towards a Taxonomy of Digital Marketplaces

Multi-sided markets (MSMs) have proven to be a successful business model in the dynamic electronic commerce environment. There exists a variety of MSMs differing in their provided features and services for their participants. Existing taxonomies often focus on value creation and business-to-business transactions. We apply Nickerson et al.’s taxonomy development approach. We especially incorporated aspects of orchestrating the distinct market sides and governance dimensions. The developed taxonomy for MSMs consists of 21 dimensions and 99 characteristics in total. We have applied our taxonomy to 44 MSMs and identified asymmetries between the market sides concerning Monetization, Network Effect Amplifiers and Provided Services. We emphasize that the taxonomy is not only an artifact for classifying the current situation of an MSM but can also be used by MSM owners to derive directions for the future development. We illustrated how these developments can be conducted by examples for five dimensions of our taxonomy

Essays on Dispersion, Fairness Perception and Partitioning of Online Prices

My dissertation is primarily on online pricing, by empirically investigating how formats and structures of prices influence consumer responses and subsequent purchasing behavior, brand choice, etc. Currently, three essays of my dissertation explore topics on price fairness perception, price dispersion, as well as price partitioning. First, although previous researchers have tested effects of price changes on consumer\u27s perceptions on price (e.g., Maxwell 1999, Campbell 2007), little work has focused on the effects of prices/costs levels on online price judgments and virtually none has examined it jointly with both internal/external reference prices from multiple comparison parties. Less work has applied price decreasing and increasing together to observe (un)fairness or associated them with asymmetric liking and disliking judgments (Herr and Page 2004). To fill this gap, we employ an expected utility model incorporating emotional factors such as disappointment (elation) and regret (rejoicing) to model online price fairness perceptions. We demonstrate a two-stage evaluation and find interesting asymmetric patterns of significant effects of four emotions on price fairness. Second, there does not exist yet a quantitative review synthesizing and explaining the discrepancy of findings on price dispersion. An empirical generalization is conducted to statistically and quantitatively summarize in which way online price dispersion goes, and what are the true determinants of the magnitude of price dispersion in E-commerce. By a meta-analysis study, we find that product category, measurement of price dispersion, controlling for heterogeneity in the study and so on, are significant factors. Third, shipping and handling (S&H) fee is examined as a popular form of partitioned price offered by E-tailers. We employ a Gain-and-Loss Utility model incorporating different levels of price gains and losses presented to customers in the transactions to model online purchase behaviors in a strategic pricing framework. We find significant asymmetry in the effects of price surcharges and price discounts on purchase quantity as well as on how customers organize and manage their shopping baskets

Emergence of Electronic Markets: Implication of Declining Transport Costs on Firm Profits and Consumer Surplus

Electronic coordination may drastically reduce transport costs, especially for digital or digitalizable products where local markets may actually shrink to a point in space. In the present paper we use a model with differentiated products to analyze the impact of declining transport costs on profits and consumer surplus. While consumers always gain, the effect on producers depends on the degree of product differentiation and the magnitude of transport costs in the electronic market mode. Profits do only rise if products are substantially differentiated – in this case the positive effect of an extended consumer base due to the preference for product differentiation dominates the negative effect of intensified competition. This result is amplified if transport costs in the electronic market mode are substantial. In this case profits only increase if products are almost independent.

Dynamic Pricing Algorithms, Consumer Harm, and Regulatory Response

Pricing algorithms are rapidly transforming markets, from ride-sharing, to air travel, to online retail. Regulators and scholars have watched this development with a wary eye. Their focus so far has been on the potential for pricing algorithms to facilitate explicit and tacit collusion. This Article argues that the policy challenges pricing algorithms pose are far broader than collusive conduct. It demonstrates that algorithmic pricing can lead to higher prices for consumers in competitive markets and even in the absence of collusion. This consumer harm can be initiated by a single firm employing a superior pricing algorithm. Higher prices arise from the automated nature of algorithms, impacting any market where firms price algorithmically. Pricing algorithms that are already in widespread use may allow sellers to extract a massive amount of wealth from consumers. Because this consumer harm arises even when firms do not collude, antitrust law cannot solve the problem. This Article looks to the history of pricing innovation in the early twentieth century to show how government can respond when new pricing technologies and strategies disrupt markets. It argues for pricing regulation as a feasible solution to the challenges non-collusive algorithmic pricing poses, and it proposes interventions targeted at when and how firms set prices