The computer software market is a textbook example of network externalities: if a user decides to work with a specific program, the utility of all other users of the same product increases. This increase in utility is not compensated for by the market; thus one speaks of network externalities....

We discuss economic rationales behind peering decisions in the Internet. In the first part of the paper we analyze the decision about a bilateral peering agreement between two commercial Internet service providers (ISPs) who are in Cournot competition. In the second part we discuss multilateral...