Simple Competitive Internet Pricing ∗

It is widely recognised that pricing is required to control congestion on the Internet. One lesson that has emerged from many proposals is that any price system should be simple and robust to competition. This is highlighted in the question currently under debate in the market for Internet services: should usage prices should be employed at all? In a duopoly model with overall positive network effects, it is shown that flat rate pricing can occur in equilibrium, even when the costs of measuring variable demand are very small. Association in Santiago. I am very grateful to Jacques Crémer, In Ho Lee and an anonymous referee for numerous helpful comments.