Is Non-Neutrality Profitable for the Stakeholders of the Internet Market? - Part II

In this part of the paper, we obtain analytical resultsfor the case that transport costs are not small (complement ofPart I), and combine them with the results in Part I of the paperto provide general results for all values of transport costs. Weshow that, in general, if an SPNE exists, it would be one of thefive possible strategies each of which we explicitly characterize.We also prove that when EUs have sufficiently high inertia forat least one of the ISPs, there exists a unique SPNE with a non-neutral outcome in which both of the ISPs are active, and the CPoffers her content with free quality on the neutral ISP and withpremium quality on the non-neutral ISP. Moreover, we show thatan SPNE does not always exist. We also analyze a benchmarkcase in which both ISPs are neutral, and prove that there exists aunique SPNE in which the CP offers her content with free qualityon both ISPs, and both ISPs are active. We also provide extensivenumerical results and discussions for all ranges of transport costs.Simulation results suggest that if the SPNE exists, it would beunique. In addition, results reveal that the neutral ISP receivesa lower payoff and the non-neutral ISP receives a higher payoff(most of the time) in a non-neutral scenario. However, we alsoidentify scenarios in which the non-neutral ISP loses payoff byadopting non-neutrality. In addition, we show that a non-neutralregime yields a higher welfare for EUs than a neutral one ifthe market power of the non-neutral ISP is small, the sensitivityof EUs (respectively, the CP) to the quality is low (respectively,high), or a combinations of these factors.