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Rural Internet access: over-subscription strategies, regulation and equilibrium

Author

Listed:
  • SeungJae Shin

    (Division of Business and Industry, Mississippi State University, Meridian, MS 39307, USA)

  • Martin B. Weiss

    (Department of Information Sciences and Telecom. University of Pittsburgh, Pittsburgh, PA 15260, USA)

  • Jack Tucci

    (Division of Business and Industry, Mississippi State University, Meridian MS 39307, USA)

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.

Suggested Citation

  • SeungJae Shin & Martin B. Weiss & Jack Tucci, 2007. "Rural Internet access: over-subscription strategies, regulation and equilibrium," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 1-12.
    • Handle: RePEc:wly:mgtdec:v:28:y:2007:i:1:p:1-12
    DOI: 10.1002/mde.1306
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    References listed on IDEAS

    as
    1. Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, vol. 31(7), pages 1035-1052, September.
    2. Shane Greenstein, 2000. "Building and Delivering the Virtual World: Commercializing Services for Internet Access," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 391-411, December.
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