Information Exchange and Competition in Communications Networks
AbstractWe develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete for such users by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off-net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also show that a ‘bill-and-keep’ system over access charges can approximate an efficient regime and we discuss when this system emerges from private negotiations.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5031.
Date of creation: May 2005
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