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INFORMATION EXCHANGE AND COMPETITION IN COMMUNICATIONS NETWORKS -super-*

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  • CARLO CAMBINI
  • TOMMASO M. VALLETTI

Abstract

We develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off-net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also study the relationship between sending and receiving retail charges as a function of the level of access charges. We identify circumstances where private negotiations over access charges induce first-best retail prices. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 56 (2008)
Issue (Month): 4 (December)
Pages: 707-728

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Handle: RePEc:bla:jindec:v:56:y:2008:i:4:p:707-728

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Cited by:
  1. Steffen Hoernig, 2014. "Going beyond Duopoly: Connectivity Breakdowns under Receiving Party Pays," FEUNL Working Paper Series wp585, Universidade Nova de Lisboa, Faculdade de Economia.
  2. Basalisco, Bruno, 2012. "The effect of user interaction on the demand for mobile text messages: Evidence from cross-country data," Information Economics and Policy, Elsevier, vol. 24(2), pages 132-144.
  3. Hoernig, Steffen, 2010. "Competition Between Multiple Asymmetric Networks: Theory and Applications," CEPR Discussion Papers 8060, C.E.P.R. Discussion Papers.
  4. Luis López, Ángel, 2011. "Mobile termination rates and the receiver-pays regime," Information Economics and Policy, Elsevier, vol. 23(2), pages 171-181, June.
  5. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
  6. Sjaak Hurkens & Ángel Luis López, 2010. "Mobile Termination and Consumer Expectations under the Receiver-Pays Regime," Working Papers 10-12, NET Institute.

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