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We address whether local ISPs should be allowed to charge content providers, who derive advertising revenue, for the right to access end-users. We compare two-sided pricing where such charges are allowed to one-sided pricing where they are prohibited. By deriving provider equilibrium actions (prices and investments), we determine which regime is welfare-superior as a function of a few key parameters. We find that two-sided pricing is more favorable when the ratio between parameters characterizing advertising rates and end-user price sensitivity is either low or high. IntroductionToday, an Internet service provider (ISP) charges both end-users who subscribe to that ISP for their last-mile Internet access as well as content providers that are directly connected to the ISP. However, an ISP generally does not charge content providers that are not directly attached to it for delivering content to end-users. One of the focal questions in the network neutrality policy debate is whether these current charging practices should continue and be mandated by law, or if ISPs ought to be allowed to charge all content providers that deliver content to the ISP's end-users. Indeed the current network neutrality debate began when the CEO of AT&T suggested that such charges be allowed (see Whitacre, 2005).To address this question, we develop a two-sided market model of the interaction of ISPs, end-users, and content providers. The model is closely related to the existing two-sided markets literature as we detail later in this section. In our model, the ISPs play the "platform" role that intermediates the two sides: content providers and end-users. We model a "neutral"

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This paper investigates how competitive cyber-insurers affect network security and welfare of the networked society. In our model, a user's probability to incur damage (from being attacked) depends on both his security and the network security, with the latter taken by individual users as given. First, we consider cyber-insurers who cannot observe (and thus, affect) individual user security. This asymmetric information causes moral hazard. Then, for most parameters, no equilibrium exists: the insurance market is missing. Even if an equilibrium exists, the insurance contract covers only a minor fraction of the damage; network security worsens relative to the no-insurance equilibrium. Second, we consider insurers with perfect information about their users' security. Here, user security is perfectly enforceable (zero cost); each insurance contract stipulates the required user security. The unique equilibrium contract covers the entire user damage. Still, for most parameters, network security worsens relative to the no-insurance equilibrium. Although cyber-insurance improves user welfare, in general, competitive cyber-insurers fail to improve network security.