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Competition between multiple asymmetric networks: Theory and applications

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  • Hoernig, Steffen

Abstract

This paper presents a tractable model of network competition with many firms, elastic subscriber demand, off-net price discrimination, call externalities, and cost and market share asymmetries. We characterize stability in expectations and equilibrium under firm- and market-level network effects. The model is applied to simulate the effects of termination rates, market maturity, and retail pricing strategies. We show that predictions based on duopoly models can be misleading, in particular concerning the effects of termination rates.

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  • Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    • Handle: RePEc:eee:indorg:v:32:y:2014:i:c:p:57-69
    DOI: 10.1016/j.ijindorg.2013.11.002
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    Cited by:

    1. Torben Stühmeier, 2013. "Access regulation with asymmetric termination costs," Journal of Regulatory Economics, Springer, vol. 43(1), pages 60-89, January.
    2. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    3. Genakos, Christos & Valletti, Tommaso, 2011. "Seesaw in the air: Interconnection regulation and the structure of mobile tariffs," Information Economics and Policy, Elsevier, vol. 23(2), pages 159-170, June.
    4. Harbord, David & Hoernig, Steffen, 2010. "Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)," MPRA Paper 21515, University Library of Munich, Germany.
    5. Hoernig, Steffen, 2016. "Going beyond duopoly: Connectivity breakdowns under receiving party pays," Information Economics and Policy, Elsevier, vol. 36(C), pages 1-9.
    6. Marc Bourreau & Carlo Cambini & Steffen Hoernig, 2015. "Price distortion under fixed-mobile substitution," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 441-454, December.
    7. David Harbord & Steffen Hoernig, 2015. "Welfare Analysis of Regulating Mobile Termination Rates in the U.K," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 673-703, December.
    8. Agostini, Claudio A. & Willington, Manuel & Lazcano, Raúl & Saavedra, Eduardo, 2017. "Predation and network based price discrimination in Chile," Telecommunications Policy, Elsevier, vol. 41(9), pages 781-791.
    9. Sobolewski, Maciej & Czajkowski, Mikołaj, 2018. "Receiver benefits and strategic use of call externalities in mobile telephony markets," Information Economics and Policy, Elsevier, vol. 44(C), pages 16-27.
    10. Genakos, Christos & Valletti, Tommaso, 2012. "Regulating prices in two-sided markets: The waterbed experience in mobile telephony," Telecommunications Policy, Elsevier, vol. 36(5), pages 360-368.
    11. Claudio Agostini & Raul Lazcano & Eduardo Saavedra & Manuel Willington, 2016. "Price Differentiation between On-Net and Off-Net Calls: An Application to the Chilean Telephony Market," Working Papers wp_051, Adolfo Ibáñez University, School of Government.
    12. Lee, Dongyeol, 2015. "Regulating termination charges in asymmetric oligopolies," Information Economics and Policy, Elsevier, vol. 32(C), pages 16-28.
    13. Kjetil Andersson & Øystein Foros & Bjørn Hansen, 2016. "Empirical Evidence on the Relationship between Mobile Termination Rates and Firms' Profits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(1), pages 129-149, January.
    14. Hoernig, Steffen & Jay, Stephan & Neumann, Karl-Heinz & Peitz, Martin & Plückebaum, Thomas & Vogelsang, Ingo, 2012. "The impact of different fibre access network technologies on cost, competition and welfare," Telecommunications Policy, Elsevier, vol. 36(2), pages 96-112.
    15. Hoernig, Steffen, 2014. "The strength of the waterbed effect depends on tariff type," Economics Letters, Elsevier, vol. 125(2), pages 291-294.
    16. Stühmeier, Torben, 2010. "Fixed to VoIP Interconnection: Regulation with Asymmetric Termination Costs," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 34, International Telecommunications Society (ITS).
    17. Urs Trinkner & Bernd Holznagel & Christian Jaag & Helmut Dietl & Haller Andreas, 2012. "Möglichkeiten eines gemeinsam definierten Universaldienst Post und Telekommunikation aus ökonomischer und juristischer Sicht," Studies and Reports, Swiss Economics, pages 1-79, September.
    18. Hurkens, Sjaak & López, Ángel L., 2021. "Mobile termination rates and retail regimes in Europe and the US: A unified theory of CPP and RPP," Information Economics and Policy, Elsevier, vol. 56(C).
    19. Tamás Sebestyén & Balázs Szabó, 2022. "Market interaction structure and equilibrium price heterogeneity in monopolistic competition," Netnomics, Springer, vol. 22(2), pages 259-282, October.
    20. Hoernig, Steffen & Monteiro, Francisco, 2020. "Zero-rating and network effects," Economics Letters, Elsevier, vol. 186(C).
    21. Steffen Hoernig; Francisco Monteiro, 2018. "Zero-rating, network effects, and capacity investments," Nova SBE Working Paper Series wp627, Universidade Nova de Lisboa, Nova School of Business and Economics.
    22. Hoernig, Steffen, 2011. "Asymmetric Broadband Wholesale Regulation," CEPR Discussion Papers 8399, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Telecommunications network competition; Elastic demand; On-/off-net pricing; Asymmetry; Multiple networks; Mobile termination rates;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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