Rural Internet Access: Over-Subscription Strategies, Regulation and Equilibrium

Document Type

Article

Publication Date

12-2007

Department

School of Business

Abstract

This paper presents an analysis of the Internet access market using a game theoretic model. In particular, we consider the Nash equilibrium of the service providers and examine their behavior on network investment and output level. We calibrate this model to fit the industry structure and data found in rural markets. In the first part of the paper, we examine the Internet industry structure and its characteristics. Based on the industry structure, we create a Cournot duopoly model, in which real world cost and revenue projections are used to find Internet access market equilibrium. In conclusion, we analyze social welfare of the equilibrium. These analyses allow us to explain the motivation for the rural ISPs' behavior, such as over-subscription and under-investment and to present an analytical framework for Internet industry policy makers. Copyright © 2007 John Wiley & Sons, Ltd.

DOI

https://doi.org/10.1002/mde.1306

First Page

1

Last Page

12

Volume

28

Issue

1

ISSN

01436570

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