Revenue Sharing Among ISPs in Two-Sided Markets

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Executive Summary

In this paper, the authors study the revenue sharing and rate allocation for Internet Service Providers (ISPs) that jointly provide network connectivity between content providers and end-users. Without colluding, each ISP may selfishly set a high transit-price to cover its cost and maximize its own profit, which inevitably results in a loss in social profit. They model this non-cooperative interaction between an "Eyeball" ISP and a "Content" ISP as a Stackelberg game and quantify the resulting loss in social profit. To recover the profit loss, they propose a revenue sharing contract between ISPs by modeling them as a supply chain to deliver traffic in a two-sided market.

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