Nonlinear Pricing of Telecommunications with Call and Network Externalities
AbstractThis paper investigates how call and network externalities affect a monopolist’s optimal nonlinear pricing of a two-way telecommunication service. The existence of call externalities results in all types of subscribers (even the highest type) making suboptimal quantities of calls in the optimum. This is because the firm being not allowed to charge incoming calls cannot control the quantities of incoming calls. Due to call externalities, there may exist some subscribers who only receive calls without making any outgoing calls in equilibrium. Also, the firm may have incentives to subsidise some low-type consumers in order to take advantage of network effects.
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Bibliographic InfoPaper provided by Department of Economics, Keele University in its series Keele Department of Economics Discussion Papers (1995-2001) with number 2000/15.
Length: 23 pages
Date of creation: 2000
Date of revision: Nov 2001
Publication status: Published in International Journal of Industrial Organization, vol. 21, issue 7, September 2003, pages 949-967. [ doi:10.1016/S0167-7187(03)00003-1 ]
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Postal: Department of Economics, Keele University, Keele, Staffordshire ST5 5BG - United Kingdom
Other versions of this item:
- Hahn, Jong-Hee, 2003. "Nonlinear pricing of telecommunications with call and network externalities," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 949-967, September.
- Cro - Mathematical and Quantitative Methods - - - - -
- JEL - Labor and Demographic Economics - - - - -
- cla - - - - - -
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