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Price distortion under fixed-mobile substitution

Author

Listed:
  • Marc Bourreau
  • Carlo Cambini
  • Steffen Hoernig

Abstract

This paper analyses the impact of substitution between fixed and mobile telephony on call prices. We develop a model where consumers differ in the benefits of mobility and firms price discriminate between on-net and off-net calls. We find that call prices are distorted downwards due to substitution possibilities and customer heterogeneity, and that this distortion increases with the fixed-mobile termination mark-up. Copyright Associazione Amici di Economia e Politica Industriale 2015

Suggested Citation

  • 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.
    • Handle: RePEc:spr:epolin:v:42:y:2015:i:4:p:441-454
    DOI: 10.1007/s40812-015-0017-2
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    References listed on IDEAS

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    1. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    2. 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.
    3. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
    4. Hoernig, Steffen, 2007. "On-net and off-net pricing on asymmetric telecommunications networks," Information Economics and Policy, Elsevier, vol. 19(2), pages 171-188, June.
    5. I. Vogelsang, 2015. "Will the U.S. and EU telecommunications policies converge? A survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(2), pages 117-155, June.
    6. Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November.
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    8. Hoernig, Steffen & Bourreau, Marc & Cambini, Carlo, 2015. "Fixed-mobile substitution and termination rates," Telecommunications Policy, Elsevier, vol. 39(1), pages 65-76.
    9. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    10. Julian Wright, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
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    12. Wolfgang Briglauer & Anton Schwarz & Christine Zulehner, 2011. "Is fixed-mobile substitution strong enough to de-regulate fixed voice telephony? Evidence from the Austrian markets," Journal of Regulatory Economics, Springer, vol. 39(1), pages 50-67, February.
    13. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Network competition; Fixed-mobile substitution; Price discrimination; L51; L92;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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