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Network Asymmetries and Access Pricing in Cellular Telecommunications

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Author Info
Viktória Kocsis () (Corvinus University of Budapest)

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Abstract

Network shares and retail prices are not symmetric in the telecommunications market with multiple bottlenecks which give rise to new questions of access fee regulation. In this paper we consider a model with two types of asymmetry arising from different entry timing, i.e. a larger reputation for the incumbent and lower cost of servicing for the entrant as a result of more advanced technology. As a result firms have divergent preferences over the access fee. In case of linear and non-linear prices the access fee might still act as the instrument of collusion, but only if a side-payment is permitted which is generally welfare decreasing. Moreover, in contrast with the European regulatory framework, the access fee on the basis of termination cost might not necessarily be a socially preferable solution.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-085/1.

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Date of creation: 16 Sep 2005
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Handle: RePEc:dgr:uvatin:20050085

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: cost asymmetry; brand loyalty; imperfect competition; network interconnection; access fee;

Other versions of this item:

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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References listed on IDEAS
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  1. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring. [Downloadable!] (restricted)
  2. Bijl, P.W.J. de & Peitz, M., 2004. "Dynamic regulation and entry in telecommunications markets : a policy framework," Discussion Paper 010, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
    Other versions:
  3. Gruber, Harald, 2001. "Competition and innovation: The diffusion of mobile telecommunications in Central and Eastern Europe," Information Economics and Policy, Elsevier, vol. 13(1), pages 19-34, March. [Downloadable!] (restricted)
  4. Dessein, Wouter, 2004. "Network competition with heterogeneous customers and calling patterns," Information Economics and Policy, Elsevier, vol. 16(3), pages 323-345, September. [Downloadable!] (restricted)
  5. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring. [Downloadable!] (restricted)
  6. Gruber, Harald & Verboven, Frank, 2001. "The diffusion of mobile telecommunications services in the European Union," European Economic Review, Elsevier, vol. 45(3), pages 577-588, March. [Downloadable!] (restricted)
    Other versions:
  7. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany. [Downloadable!]
  8. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February. [Downloadable!] (restricted)
  9. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February. [Downloadable!] (restricted)
  10. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May. [Downloadable!] (restricted)
  11. Hahn, Jong-Hee, 2004. "Network competition and interconnection with heterogeneous subscribers," International Journal of Industrial Organization, Elsevier, vol. 22(5), pages 611-631, May. [Downloadable!] (restricted)
    Other versions:
  12. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February. [Downloadable!] (restricted)
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