Network competition and interconnection with heterogeneous subscribers
AbstractThis paper considers competition in a telecommunications industry, where heterogeneous consumers have private information about their preferences for telephone service and firms are allowed to use nonlinear tariffs. Networks, which directly compete for customers, are interconnected and pay access charges to one another. In a symmetric equilibrium, each networkâs profit-maximising pricing policy generally involves a distortion in call allocation for all types, except when the (reciprocal) access charge is set equal to the call-termination cost. Under certain conditions, however, the resulting per-firm profit is independent of the access charge, and so the networks have no incentive to collude by choosing an access charge higher (or lower) than its cost. In this case, there is no need for regulatory intervention regarding access charges other than to provide a âfocal pointâ by recommending that the networks set access charges equal to the actual call-termination cost. This policy induces the efficient consumption of calls. Key Words : Two-way Networks, Interconnection, Nonlinear Pricing,Telecommunications Policy.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 22 (2004)
Issue (Month): 5 (May)
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Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Jong-Hee Hahn, 2000. "Network Competition and Interconnection with Heterogeneous Subscribers," Keele Department of Economics Discussion Papers (1995-2001) 2000/11, Department of Economics, Keele University.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
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