Proper-Coaseans, the Internet, and Price Discrimination

This week�s Economist has an interesting summary of a paper by Andrew Odlyzko in the Review of Network Economics. The following is the abstract of the paper:

A wide-ranging discussion of the evolution of pricing in early transportation industries, such as lighthouses, canals, and turnpikes, is presented. It shows that price discrimination was an important factor in the development of those industries, and tended to intensify with time. In order to make differential tariffs effective, service providers had the right of detailed inspection of the cargo. These historical precedents help explain the drive by large sectors of the telecommunications industry to gain greater control over what is transmitted over the Internet. The implications for the evolution of the Internet are briefly explored.

As the Economist notes, �On England's canals, prices by cargo varied widely by the 1790s, according to both content and ultimate use: for instance, transport was free for manure for adjacent fields and stone for road repairs. To some extent, regulation limited canal operators' ability to exploit their market power: until 1845, they were barred from offering transport service themselves, in a �structural separation� of the sort sometimes proposed in telecoms today.�

History of transport applied to telecommunications, very interesting. Here is another must read paper from the journal on regulatory impressionism (thanks to Knowledge Problem).


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This page contains a single entry by Paul published on October 23, 2004 10:44 PM.

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