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SSRN
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Network Diversity, Market Entry, and the Global Internet Backbone

SSRN Electronic Journal
2023
  • 0
    Citations
  • 1,145
    Usage
  • 9
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    1,145
    • Abstract Views
      948
    • Downloads
      197
  • Captures
    9
  • Ratings
    • Download Rank
      276,577

Article Description

In many industries, buyers diversify their supplier base to manage supplier disruption risk. We investigate the importance of such diversification as a determinant of demand and supplier entry in the context of the internet backbone, the worldwide network of undersea fiber-optic cables that underpins the internet. We specify a model of inter-regional bandwidth demand and cable operators' dynamic entry and supply choices. The model is estimated using novel data on cross-border data flows, prices, and cable characteristics. Counterfactual analysis reveals that supplier diversification accounts for a large share of entry and surplus created between 2005 and 2021. Relative to the socially optimal level of entry, distortions due to suppliers' inability to capture fully the social benefits of diversity are as large as distortions due to business stealing.

Bibliographic Details

El Hadi Caoui; Andrew Steck

Elsevier BV

network diversity; internet backbone; entry; dynamic games; undersea cables

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