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Foreclosing Competition through Access Charges and Price Discrimination

Author

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  • Lopez, Angel L.
  • Rey, Patrick

Abstract

This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist in the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough.

Suggested Citation

  • Lopez, Angel L. & Rey, Patrick, 2009. "Foreclosing Competition through Access Charges and Price Discrimination," Institutions and Markets Papers 55326, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemim:55326
    DOI: 10.22004/ag.econ.55326
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2013. "Termination fees revisited," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 738-750.
    2. Sjaak Hurkens & Doh-Shin Jeon, 2009. "Mobile Termination and Mobile Penetration," UFAE and IAE Working Papers 777.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    3. Sjaak Hurkens & Ángel Luis López, 2010. "Mobile Termination and Consumer Expectations under the Receiver-Pays Regime," Working Papers 10-12, NET Institute.
    4. Edmond Baranes & Stefan Behringer & Jean-Christophe Poudou, 2017. "Mobile Access Charges and Collusion under Asymmetry," Annals of Economics and Statistics, GENES, issue 127, pages 33-60.
    5. Steffen Hoernig & Roman Inderst & Tommaso Valletti, 2014. "Calling circles: network competition with nonuniform calling patterns," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 155-175, March.
    6. Luis López, Ángel, 2011. "Mobile termination rates and the receiver-pays regime," Information Economics and Policy, Elsevier, vol. 23(2), pages 171-181, June.
    7. Muck, Johannes, 2012. "The effect of on-net / off-net differentiation and heterogeneuous consumers on network size in mobile telecommunications : an agent-based aporoach," 23rd European Regional ITS Conference, Vienna 2012 60355, International Telecommunications Society (ITS).
    8. Hanna Hałaburda & Yaron Yehezkel, 2016. "The Role of Coordination Bias in Platform Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(2), pages 274-312, April.
    9. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    10. Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 541-552.
    11. Edmond Baranes & Cuong Huong Vuong, 2012. "Policy Implications of Asymmetric Termination Rate Regulation in Europe," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 14, Edward Elgar Publishing.
    12. Hanna Halaburda & Bruno Jullien & Yaron Yehezkel, 2013. "Dynamic Network Competition," Working Papers 13-10, NET Institute.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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