Email pricing

Abstract

We compare the magnitude of, and welfare generated by, uniform welfare-maximising,Ramsey and monopoly pricing in email networks. Messages are defined by the utilitythey give to their sender and receiver. Senders tend to pay more than receivers when theaverage sender utility is higher than the average receiver utility, and vice versa. Whenmessage preference distributions are symmetric receivers pay more than senders. Becauseprices cannot be (too) negative, the interior solutions for all price types hold onlywhen the distributions for sender and receiver utility are similar. The comparative welfareanalysis shows that in some situations the use of uniform, Ramsey and zero priceswill not generate substantial welfare losses relative to feasible perfectly discriminatoryprices. Monopoly prices are unlikely to be efficient.