IDEAS home Printed from https://ideas.repec.org/p/ide/wpaper/20666.html
   My bibliography  Save this paper

Termination fees revisited

Author

Listed:
  • Jullien, Bruno
  • Rey, Patrick
  • Sand-Zantman, Wilfried

Abstract

We reconsider the question of the optimal level of termination fees between communication networks in the context of heterogeneous usage and elastic participation. The interaction between these two features yields new insights; in our model: i) The profit maximizing reciprocal termination fee is above marginal cost; ii) the welfare maximizing termination fee is also above cost; iii) the welfare-maximizing termination fee is below the profit-maximizing one in the absence of termination-based price discrimination, but can be above it otherwise.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2009. "Termination fees revisited," IDEI Working Papers 551, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2012.
    • Handle: RePEc:ide:wpaper:20666
    as

    Download full text from publisher

    File URL: http://idei.fr/sites/default/files/medias/doc/by/rey/termination.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    2. 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.
    3. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
    4. Berger, Ulrich, 2005. "Bill-and-keep vs. cost-based access pricing revisited," Economics Letters, Elsevier, vol. 86(1), pages 107-112, January.
    5. de Bijl, Paul W. J. & Peitz, Martin, 2004. "Dynamic regulation and entry in telecommunications markets: a policy framework," Information Economics and Policy, Elsevier, vol. 16(3), pages 411-437, September.
    6. Dessein, Wouter, 2003. "Network Competition in Nonlinear Pricing," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 593-611, Winter.
    7. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    8. Schiff Aaron, 2008. "The "Waterbed" Effect and Price Regulation," Review of Network Economics, De Gruyter, vol. 7(3), pages 1-23, September.
    9. Bolt Wilko & Tieman Alexander F., 2006. "Social Welfare and Cost Recovery in Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-15, March.
    10. Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2009. "Mobile Call Termination Revisited," TSE Working Papers 10-198, Toulouse School of Economics (TSE), revised Aug 2010.
    11. 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.
    12. Ángel L. López & Patrick Rey, 2009. "Foreclosing Competition through Access Charges and Price Discrimination," Working Papers 2009.99, Fondazione Eni Enrico Mattei.
    13. Poletti, Stephen & Wright, Julian, 2004. "Network interconnection with participation constraints," Information Economics and Policy, Elsevier, vol. 16(3), pages 347-373, September.
    14. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-564, May.
    15. Hahn, Jong-Hee, 2004. "Network competition and interconnection with heterogeneous subscribers," International Journal of Industrial Organization, Elsevier, vol. 22(5), pages 611-631, May.
    16. Dessein, Wouter, 2004. "Network competition with heterogeneous customers and calling patterns," Information Economics and Policy, Elsevier, vol. 16(3), pages 323-345, September.
    17. Joan Calzada & Tommaso M. Valletti, 2008. "Network Competition and Entry Deterrence," Economic Journal, Royal Economic Society, vol. 118(531), pages 1223-1244, August.
    18. 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.
    19. 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.
    20. Berger Ulrich, 2005. "Access Charges in the Presence of Call Externalities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
    21. 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, March.
    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


    Cited by:

    1. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    2. Edmond Baranes & Stefan Behringer & Jean-Christophe Poudou, 2017. "Mobile Access Charges and Collusion under Asymmetry," Annals of Economics and Statistics, GENES, issue 127, pages 33-60.
    3. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    4. Sjaak Hurkens & Angel L. Lopez, 2014. "Who Should Pay for Two-Way Interconnection?," Working Papers 774, Barcelona School of Economics.
    5. Thomas P. Tangerås, 2014. "Network competition with income effects," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 645-673, September.
    6. Rohit Prasad & Rupamanjari Ray, 2015. "The relation of traffic balance and network size: a case from the indian mobile industry," Netnomics, Springer, vol. 16(3), pages 149-167, December.
    7. Hawthorne, Ryan, 2018. "The effects of lower mobile termination rates in South Africa," Telecommunications Policy, Elsevier, vol. 42(5), pages 374-385.
    8. Martin Quinn & Miguel Godinho de Matos & Christian Peukert, 2022. "The Welfare Effects of Mobile Internet Access - Evidence from Roam-Like-at-Home," CESifo Working Paper Series 9612, CESifo.
    9. Harrison, Rodrigo & Hernandez, Gonzalo & Muñoz, Roberto, 2019. "A discrete model of market interaction in the presence of social networks and price discrimination," Mathematical Social Sciences, Elsevier, vol. 102(C), pages 48-58.
    10. Chen, Yi-Ting & Sun, Edward W. & Lin, Yi-Bing, 2020. "Merging anomalous data usage in wireless mobile telecommunications: Business analytics with a strategy-focused data-driven approach for sustainability," European Journal of Operational Research, Elsevier, vol. 281(3), pages 687-705.
    11. Lee, Dongyeol, 2015. "Regulating termination charges in asymmetric oligopolies," Information Economics and Policy, Elsevier, vol. 32(C), pages 16-28.
    12. Ángel L. López & Patrick Rey, 2016. "Foreclosing Competition Through High Access Charges and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 64(3), pages 436-465, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sjaak Hurkens & Ángel Luis López, 2010. "Mobile Termination and Consumer Expectations under the Receiver-Pays Regime," Working Papers 10-12, NET Institute.
    2. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    3. Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 541-552.
    4. Sjaak Hurkens & Angel L. Lopez, 2014. "Who Should Pay for Two-Way Interconnection?," Working Papers 774, Barcelona School of Economics.
    5. Hawthorne, Ryan, 2018. "The effects of lower mobile termination rates in South Africa," Telecommunications Policy, Elsevier, vol. 42(5), pages 374-385.
    6. Luis López, Ángel, 2011. "Mobile termination rates and the receiver-pays regime," Information Economics and Policy, Elsevier, vol. 23(2), pages 171-181, June.
    7. Agostini, Claudio A. & Willington, Manuel & Lazcano, Raúl & Saavedra, Eduardo, 2017. "Predation and network based price discrimination in Chile," Telecommunications Policy, Elsevier, vol. 41(9), pages 781-791.
    8. Hurkens, Sjaak & López, Ángel L., 2012. "The welfare effects of mobile termination rate regulation in asymmetric oligopolies: The case of Spain," Telecommunications Policy, Elsevier, vol. 36(5), pages 369-381.
    9. Ángel L. López & Patrick Rey, 2016. "Foreclosing Competition Through High Access Charges and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 64(3), pages 436-465, September.
    10. Thomas P. Tangerås, 2014. "Network competition with income effects," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 645-673, September.
    11. Rohit Prasad & Rupamanjari Ray, 2015. "The relation of traffic balance and network size: a case from the indian mobile industry," Netnomics, Springer, vol. 16(3), pages 149-167, December.
    12. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    13. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    14. Hurkens, Sjaak & Jeon, Doh-Shin, 2009. "Mobile termination and mobile penetration," IESE Research Papers D/816, IESE Business School.
    15. Claudio Agostini & Raul Lazcano & Eduardo Saavedra & Manuel Willington, 2016. "Price Differentiation between On-Net and Off-Net Calls: An Application to the Chilean Telephony Market," Working Papers wp_051, Adolfo Ibáñez University, School of Government.
    16. 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.
    17. Genakos, Christos & Valletti, Tommaso, 2012. "Regulating prices in two-sided markets: The waterbed experience in mobile telephony," Telecommunications Policy, Elsevier, vol. 36(5), pages 360-368.
    18. Ángel L. López & Patrick Rey, 2009. "Foreclosing Competition through Access Charges and Price Discrimination," Working Papers 2009.99, Fondazione Eni Enrico Mattei.
    19. Thomas P. Tangerås, 2010. "Network Competition: Workhorse Resurrection," Working Papers 10-05, NET Institute.
    20. 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, March.

    More about this item

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ide:wpaper:20666. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/idtlsfr.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.