Multiproduct price discrimination with quantity limits: An application to zero-rating

Zero-rating is a recent practice that allows internet providers to discriminate among contents. Focusing on the consumer side, we show that a monopolist provider may implement zero-rating in order to extract more surplus from consumers who have heterogeneous tastes for content. This is akin to the practice of quantity discounts with one difference: the monopolist screens consumer types by distorting not only the total consumption, but also the composition of consumption. Zero-rating may lead to an increase in network capacity and improve welfare.