Competing One-Way Essential Complements: The Forgotten Side of Net Neutrality

Abstract

We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use -a strong form of net neutrality-is not welfare improving.

Platform–merchant competition for sales services

“…However, in their model, merchants cannot sell both via the direct and the intermediated channel. Our paper is also related to the literature on one-way complements (see Broos & Gautier, 2017;Flores-Fillol, Iozzi, & Valletti, 2018). Indeed, consumers only use the sales service on the platform if they are buying a primary product from a merchant.…”