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Competition Between Multiple Asymmetric Networks: Theory and Applications

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  • Hoernig, Steffen

Abstract

We present a tractable model of competition between an arbitrary number of interconnected communications networks in the presence of tariff-mediated network externalities, call externalities, and cost and market share asymmetries. On the theory side, we provide a criterion for stability in expectations and determine equilibrium outcomes in linear and two-part tariffs. As applications, we reconsider mobile termination for calls from the fixed network (FTM), and between mobile networks (MTM). We show that there is a partial FTM waterbed effect under linear tariffs, and that with more than two networks some known duopoly results are reversed: Under multi-part tariffs, consumer surplus may decrease (rather than increase), and under linear tariffs both on- and off-net prices may increase with higher MTM termination charges.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8060.

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Date of creation: Oct 2010
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Handle: RePEc:cpr:ceprdp:8060

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Related research

Keywords: call externality; mobile termination rates; multiple networks; on/off-net pricing; Telecommunications network competition; waterbed effect;

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References

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Citations

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Cited by:
  1. 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.
  2. 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.
  3. Hoernig, Steffen, 2011. "Asymmetric Broadband Wholesale Regulation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8399, C.E.P.R. Discussion Papers.
  4. Andersson, Kjetil & Foros, Øystein & Hansen, Bjørn, 2012. "Empirical evidence on the relationship between mobile termination rates and firms’ profit," Discussion Papers 2012/10, Department of Business and Management Science, Norwegian School of Economics.
  5. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 32(C), pages 57-69.
  6. Torben Stühmeier, 2013. "Access regulation with asymmetric termination costs," Journal of Regulatory Economics, Springer, Springer, vol. 43(1), pages 60-89, January.
  7. 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).
  8. Steffen Hoernig, 2014. "Going beyond Duopoly: Connectivity Breakdowns under Receiving Party Pays," FEUNL Working Paper Series wp585, Universidade Nova de Lisboa, Faculdade de Economia.
  9. Steffen Hoernig, 2014. "The Strength of the Waterbed Effect Depends on Tariff Type," FEUNL Working Paper Series wp586, Universidade Nova de Lisboa, Faculdade de Economia.

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