This thesis addresses a problem that has been debated by the academic community, the government and the industry at large which is : How... Show moreThis thesis addresses a problem that has been debated by the academic community, the government and the industry at large which is : How unfair is a tiered Internet compared to a open Internet ? On one hand we have an open Internet in which all the data is treated equally and the Internet service providers have no say when it comes to a pricing differentiation and on the other hand we have a tiered Internet in which the ISPs can charge different amounts based on certain constraints like the type of data or the content provider. The architecture of the internet imposes certain constraints which need mechanisms to efficiently allocate the resources among all the competing participants who only concern themselves with their best interests without considering the social benefit as a whole. We consider one such mechanism known as proportional sharing in which resource or the bandwidth is divided among the participants based on their bids. An efficient allocation is one which maximizes the aggregate utility of the users. We consider inelastic demand with the participants as price anticipating and ensure market clearing.We examine a tiered Internet in which the ISPs can partition the bandwidth based on certain constraints and charge a premium for better service. The participants involved are from all economic classes, so they have different amounts of wealth at their disposal. We quantify the relative loss incurred by the participants in lower economic classes as compared to the higher economic classes. We also calculate the loss of efficiency caused by competition among the participants as compared to the optimum social allocation. Show less
