Policy Analysis 6

When you download an MP3 (or other large file from the Internet, do you
consider how your download may create costs to other people in the form of
Internet congestion? Application 6.4 (in book) discusses congestion costs on
roads and highways, but a similar analysis can be applied to Internet usage.
Internet congestion has become increasingly problematic. In fact, there are
actually Internet ''weather report'' sites that detail, in real time, the
degree of Internet congestion in various geographic regions. For example,
see http://www.internettrafficreport.com. For a good overiew of the
''economic, institutional, and technological structure'' of the Internet, go
to Jeffrey Mackie-Mason and Hal Varian's ''Economics FAQs about the
Internet'' at \\
http://www.press.umich.edu/jep/works/FAQs.html.
Link to the
Web site and read the sections ''How can the Internet Deal with Increasing
Congestion?'' and ''How might Prices be Used to Control Congestion?'' Why do
the authors suggest that Internet congestion is more serious than say,
highway congestion? Discuss how the marginal cost of using the Internet
varies with the degree of congestion at the time. What pricing scheme do the
authors propose to control congestion? What do you think of such a proposal?