Advanced Search
MyIDEAS: Login to save this paper or follow this series

Mobile Termination, Network Externalities, and Consumer Expectations

Contents:

Author Info

  • Sjaak Hurkens
  • Ángel L. López

Abstract

We re-examine the literature on mobile termination in the presence of network externalities. Externalities arise when firms discriminate between on- and off-net calls or when subscription demand is elastic. This literature predicts that profit decreases and consumer surplus increases in termination charge in a neighborhood of termination cost. This creates a puzzle since in reality we see regulators worldwide pushing termination rates down while being opposed by network operators. We show that this puzzle is resolved when consumers expectations are assumed passive but required to be fulfilled in equilibrium (as defined by Katz and Shapiro, AER 1985), instead of being rationally responsive to non-equilibrium prices, as assumed until now.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://research.barcelonagse.eu/tmp/working_papers/441.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 441.

as in new window
Length:
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:bge:wpaper:441

Contact details of provider:
Postal: Ramon Trias Fargas, 25-27, 08005 Barcelona
Phone: +34 93 542-1222
Fax: +34 93 542-1223
Email:
Web page: http://www.barcelonagse.eu
More information through EDIRC

Related research

Keywords: Networks; Rational Expectations; Access Pricing; Interconnection; Regulation; Telecommunications;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
  2. Joan Calzada & Tommaso M. Valletti, 2008. "Network Competition and Entry Deterrence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 118(531), pages 1223-1244, 08.
  3. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June.
  4. Nicholas Economides, 1995. "The Economics of Networks," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995.
  5. Lopez, Angel L. & Rey, Patrick, 2009. "Foreclosing competition through access charges and price discrimination," IESE Research Papers D/801, IESE Business School.
  6. Hahn, Jong-Hee, 2004. "Network competition and interconnection with heterogeneous subscribers," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(5), pages 611-631, May.
  7. Harbord David & Pagnozzi Marco, 2010. "Network-Based Price Discrimination and `Bill-and-Keep' vs. `Cost-Based' Regulation of Mobile Termination Rates," Review of Network Economics, De Gruyter, De Gruyter, vol. 9(1), pages 1-46, February.
  8. Paul Klemperer & Joseph Farrell, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Economics Series Working Papers 2006-W07, University of Oxford, Department of Economics.
  9. Wouter Dessein, 2000. "Network Competition in Nonlinear Pricing," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 00-22, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  11. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
  12. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, Econometric Society, vol. 49(1), pages 105-30, January.
  13. Catherine C. de Fontenay & Joshua S. Gans, 2004. "Vertical Integration in the Presence of Upstream Competition," Department of Economics - Working Papers Series, The University of Melbourne 904, The University of Melbourne.
  14. Skrzypacz, Andrzej & Mitchell, Matthew F., 2005. "Network Externalities and Long-Run Market Shares," Research Papers 1879, Stanford University, Graduate School of Business.
  15. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
  16. 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, 03.
  17. Berger, Ulrich, 2005. "Bill-and-keep vs. cost-based access pricing revisited," Economics Letters, Elsevier, vol. 86(1), pages 107-112, January.
  18. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  19. Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
  20. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. David A. Malueg & Marius Schwartz, 2006. "COMPATIBILITY INCENTIVES OF A LARGE NETWORK FACING MULTIPLE RIVALS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 527-567, December.
  22. Sjaak Hurkens & Doh-Shin Jeon, 2009. "Mobile termination and mobile penetration," Economics Working Papers 1166, Department of Economics and Business, Universitat Pompeu Fabra.
  23. Matutes, Carmen & Vives, Xavier, 1996. "Competition for Deposits, Fragility, and Insurance," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 5(2), pages 184-216, April.
  24. Anderson, Simon P & De Palma, Andre, 1992. "The Logit as a Model of Product Differentiation," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 51-67, January.
  25. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, Springer, vol. 22(1), pages 27-46, February.
  26. Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2009. "Termination fees revisited," IDEI Working Papers 551, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2012.
  27. Lee, In Ho & Mason, Robin, 2001. "Market structure in congestible markets," European Economic Review, Elsevier, vol. 45(4-6), pages 809-818, May.
  28. Griva, Krina & Vettas, Nikolaos, 2004. "Price Competition in a Differentiated Products Duopoly Under Network Effects," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4574, C.E.P.R. Discussion Papers.
  29. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
  30. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, Springer, vol. 14(1), pages 1-25, February.
  31. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier, Elsevier.
  32. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  33. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  34. Harbord, David & Pagnozzi, Marco, 2008. "On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates," MPRA Paper 14540, University Library of Munich, Germany.
  35. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(538), pages F270-F307, 06.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kongaut, Chatchai & Bohlin, Erik, 2012. "Impacts of mobile termination rates (MTRs) on retail prices: The implication for regulators," 23rd European Regional ITS Conference, Vienna 2012 60348, International Telecommunications Society (ITS).
  2. Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 30(6), pages 541-552.
  3. Sjaak Hurkens & Ángel Luis López, 2010. "Mobile Termination and Consumer Expectations under the Receiver-Pays Regime," Working Papers 10-12, NET Institute.
  4. Griva, Krina & Vettas, Nikolaos, 2011. "Price competition in a differentiated products duopoly under network effects," Information Economics and Policy, Elsevier, vol. 23(1), pages 85-97, March.
  5. Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2013. "Termination fees revisited," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 31(6), pages 738-750.
  6. Sjaak Hurkens & Ángel Luis López, 2011. "The Welfare Effects of Mobile Termination Rate Regulation in Asymmetric Oligopolies: the Case of Spain," Working Papers 11-09, NET Institute.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:441. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.