We describe the basic economic theory of pricing a congestible resource such as an ftp server, a router, a Web site, etc. In particular, we examine the implications of “congestion pricing” as a way to encourage efficient use of network resources. We explore the implications of flat pricing and congestion pricing for capacity expansion in centrally planned, competitive, and monopolistic environments.

I analyze the salient features of networks and point out the similarities between the economic structure of networks and the structure of vertically related industries. The analysis focuses on positive consumption and production externalities, commonly called network externalities. I discuss their sources and their effects on pricing and market structure. I distinguish between results that do not depend on the underlying industry microstructure (the 'macro' approach) and those that do (the 'micro' approach). I analyze the issues of compatibility, coordination to technical standards, interconnection and interoperability, and their effects on pricing and quality of services and on the value of network links in various ownership structures. I also briefly discuss the issue of interconnection fees for bottleneck facilities.

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The economics of information security has recently become a thriving and fast-moving discipline. As distributed systems are assembled from machines belonging to principals with divergent interests, we find that incentives are becoming as impor-tant as technical design in achieving dependability. The new field provides valuable insights not just into ‘security ’ topics (such as bugs, spam, phishing, and law en-forcement strategy) but into more general areas such as the design of peer-to-peer systems, the optimal balance of effort by programmers and testers, why privacy gets eroded, and the politics of digital rights management.

We discuss the incentive of an exclusive holder of a technology to share it with competitors in a market with network externalities. We assume that high expected sales increase the willingness to pay for the good. This is named the 'network effect'. At a stable fulfilled expectations equilibrium, where the actual sales are equal to the expected ones, it is shown that. if the network effect is sufficiently strong, a quantity leader has an incentive to invite entry and license his technology without charge. If the quantity leader has the opportunity to use lump sum license fees, he will invite a larger number of competitors. If no lump sum fees are allowed, the leader will charge a decreasing fee in the intensity of the network externality and will invite entry. In markets with very strong network externalities. the leader pays a subsidy to the invited followers. We also show that the results hold under uncertainty, and when the post-entry competition is Cournot.

This paper analyzes the economics of industries where network externalities are significant. In such industries, firms have strong incentives to adhere to common technical compatibility standards, so that they reap the network externalities of the whole group. However, a firm also benefits from producing an incompatible product thereby increasing its horizontal product differentiation. We show how competition balances these opposing incentives. We find that market equilibria often exhibit extreme disparities in sales, output prices, and profits across firms, despite no inherent differences in the firms' production technologies. This may explain the frequent domination of network industries by one or two firms. We also find that the presence of network externalities dramatically affects conventional welfare analysis, as total surplus in markets where these externalities are strong is highest under monopoly and declines with entry of additional firms.

Network goods exhibit positive consumption externalities, commonly known as "network externalities." In markets, this fact can give rise to the existence of a critical mass point, that is, a minimum network size that can be sustained in equilibrium, given the cost and market structure of the industry. In this paper, we describe the conditions under which a critical mass point exists for a network good. We also characterize the existence of critical mass points under various market structures. Surprisingly, neither existence nor the size of the minimum feasible network depends on market structure. Thus, even though a monopolist enjoys an additional degree of freedom through its influence over expectations, and even though monopolistic and oligopolistic markets will in general provide a smaller sized network than perfect competition, the critical mass point is nonetheless the same. We extend these results by making the model dynamic and by generalizing it to allow durable goods.

In this paper we attempt to gain an understanding of the behaviour of users in a multipoint, interactive communication scenario. In particular, we wish to understand the dynamics of user participation at a session level. We present wide-area session-level traces of the popular multiplayer networked games Quake and Half-Life. These traces were gathered by regularly polling 2256 game servers located all over the Internet, and querying the number of players present at each server and how long they had been playing. We analyse three specific features of the data: the number of players in a game, the interarrival times between players and the length of a player’s session. We find significant time-ofday and network externality effects in the number of players. Player duration times fit an exponential distribution, while interarrival times fit a heavy-tailed distribution. The implications of our findings are discussed in the context of provisioning and charging for network quality of service for multipoint and multicast transmission. This work is ongoing. 1

Despite its power as a transactions network, scant attention has been given to incorporating an electronic call into a major market center such as the NYSE or Nasdaq. An electronic call clears the markets for all assets at predetermined points in time. By bunching many transactions together, a call market increases liquidity, thereby decreasing transaction costs for public participants. After describing alternative call market structures and their attributes, we propose that an open book electronic call be held three times during the trading day: at the open, at 12:00 noon, and at the close. We discuss the impact of this innovation on an array of issues, including order flow and handling, information revelation, and market transparency. We also discuss the proposed changes from the perspectives of investors, listed companies, exchanges, brokers, and

The current research studies the dynamics of one instance of dynamic pricing-- group-buying discounts--used by MobShop.com, whose products ’ selling prices drop as more buyers place their orders. We use an econometric model to analyze changes in the number of orders for Mobshop-listed products over various periods of time. We find that the number of existing orders has a significant positive effect on new orders placed during each 3-hour period, indicating the presence of a positive participation externality effect. We also find evidence for expectations of falling prices, a price drop effect. The results also reveal a significant ending effect, as more orders were placed during the last 3-hour period of the auction cycles.