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Mobile Phone Termination Charges with Asymmetric Regulation

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Author Info
Pio Baake
Kay Mitusch

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Abstract

We model competition between two unregulated mobile phone companies with price-elastic demand and less than full market coverage. We also assume that there is a regulated full-coverage fixed network. In order to induce stronger competition, mobile companies could have an incentive to raise their reciprocal mobile-to-mobile access charges above the marginal costs of termination. Stronger competition leads to an increase of the mobiles' market shares, with the advantage that (genuine) network effects are strengthened. Therefore, 'collusion' may well be in line with social welfare.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.43371.de/dp500.pdf
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Publisher Info
Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 500.

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Length: 23 p.
Date of creation: 2005
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Publication status: Published in: Journal of Economics (2009), 241-261
Handle: RePEc:diw:diwwpp:dp500

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Related research
Keywords: Telecommunication; Mobile phones; Mobile-to-mobile access charges; Network effects;

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Find related papers by JEL classification:
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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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. Cambini, Carlo & Valletti, Tommaso M., 2003. "Network competition with price discrimination: 'bill-and-keep' is not so bad after all," Economics Letters, Elsevier, vol. 81(2), pages 205-213, November. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
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  4. Gans, Joshua S. & King, Stephen P., 2000. "Mobile network competition, customer ignorance and fixed-to-mobile call prices," Information Economics and Policy, Elsevier, vol. 12(4), pages 301-327, December. [Downloadable!] (restricted)
    Other versions:
  5. Poletti, Stephen & Wright, Julian, 2004. "Network interconnection with participation constraints," Information Economics and Policy, Elsevier, vol. 16(3), pages 347-373, September. [Downloadable!] (restricted)
  6. Tommaso M. Valletti & Carlo Cambini, 2005. "Investments and Network Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 446-468, Summer.
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  7. Canoy, Marcel & Peitz, Martin, 1997. "The Differentiation Triangle," Journal of Industrial Economics, Blackwell Publishing, vol. 45(3), pages 305-28, September. [Downloadable!] (restricted)
  8. Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November. [Downloadable!] (restricted)
  9. Shmuel S. Oren & Stephen A. Smith, 1981. "Critical Mass and Tariff Structure in Electronic Communications Markets," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 467-487, Autumn. [Downloadable!] (restricted)
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