Impact on retail prices of non-neutral wholesale prices for content providers

Posted by D. Daniel Sokol

Giuseppe D’ACQUISTO (Garante per la protezione dei dati personali), Patrick MAILLE (Universite europeenne de Bretagne), Maurizio Naldi (Universita degli Studi di Roma “Tor Vergata”) and Bruno Tuffin (Universite de Rennes 1) have written on Impact on retail prices of non-neutral wholesale prices for content providers.

ABSTRACT: The impact of wholesale prices is examined in a context where the end customer access both free content and payper-use content, delivered by two different providers through a common network provider. We formulate and solve the game between the network provider and the pay-per-use content provider, where both use the price they separately charge the end customer with as a leverage to maximize their profits. In the neutral case (the network provider charges equal wholesale prices to the two content providers), the benefits coming from wholesale price reductions are largely retained by the pay-peruse content provider. When the free content provider is charged more than its pay-per-use competitor, both the network provider and the pay-per-use content provider see their profit increase, while the end customer experiences a negligible reduction in the retail price.