Differential Pricing for Internet Traffic: Theory and Evidence from a Chinese ISP

Speaker：SHI Ce（Assistant Professor，Chinese University of Hong Kong）

Host：XU Xinyi, Assistant Professor, Lingnan College

Time and Date：14:30-17:30, Jul.1, 2022

Venue: Wang Daohan Conference Room，Lingnan Hall

Language: English +Chinese

Tencent meeting: 840-592-613

Abstract:

Despite the growing importance of the digital economy, little is known about the welfare effect of differential pricing for Internet traffic. To investigate this question, we first analyze a model of monopoly differential pricing in a two-sided market, where an Internet service provider (ISP) charges both content providers for bandwidth and households for Internet service. We show new theoretical results that also guide our empirical analysis. Using a unique dataset on monthly transactions between a Chinese ISP and content providers, we estimate a model of the Internet market and quantify the welfare effects of differential pricing. Our counterfactual analysis shows that both consumer surplus and content provider surplus increase under differential pricing; however, the welfare gain is captured by a small number of big content providers, while other content providers become worse off.

 Profile of the speaker:

SHI Ce ,Assistant Professor of the Department of Economics of the Chinese University of Hong Kong, Deputy Director of the Zhejiang University-Chinese University of Hong Kong Digital Economy Joint Research Center. His research focuses on applied microeconomics