Network Competition and Access Charge Rules
AbstractThis paper presents a model of two competing local telecommunications networks which are mandated to interconnect. After negotiating the access charges, the companies engage in price competition. Given the prices, each consumer selects a network and determines the consumption of phone calls. Using a discrete/continuous consumer choice model, it is shown that a pure strategy equilibrium exists quite generally and satisfies desirable properties. This equilibrium can be implemented by a simple rule that sets the access charges at a common discount from the retail prices. It requires no information and the discount factor is chosen by the companies through negotiations. Finally, if the networks are highly substitute, the retail prices obtained by imposing this rule will approximate the efficient prices. Copyright 2002 by Blackwell Publishers Ltd and The Victoria University of Manchester
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Bibliographic InfoArticle provided by University of Manchester in its journal Manchester School.
Volume (Year): 70 (2002)
Issue (Month): 1 (January)
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- Joan Calzada & Tommaso M. Valletti, 2008.
"Network Competition and Entry Deterrence,"
Royal Economic Society, vol. 118(531), pages 1223-1244, 08.
- Doh-Shin Jeon, 2005. "A simple access pricing rule to achieve the Ramsey outcome for interconnected networks," Economics Working Papers 808, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2005.
- Peitz, Martin & Valletti, Tommaso M. & Wright, Julian, 2004. "Competition in telecommunications: an introduction," Information Economics and Policy, Elsevier, vol. 16(3), pages 315-321, September.
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