A Retail Benchmarking Approach to Efficient Two-way Access Pricing: Two-Part Tariffs
AbstractWe study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under competition in linear prices, derived by Jeon (2005), but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under the class of rules. Therefore, the regulator can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: in particular, we show that the regulator can achieve static and dynamic efficiency at the same time.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 07-11.
Length: 27 pages
Date of creation: Sep 2007
Date of revision: Sep 2007
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Web page: http://www.NETinst.org/
Networks; Access Pricing; Interconnection; Competition Policy; Telecommunications; Investment; Two-part Tariff;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-20 (All new papers)
- NEP-COM-2007-10-20 (Industrial Competition)
- NEP-LAW-2007-10-20 (Law & Economics)
- NEP-MIC-2007-10-20 (Microeconomics)
- NEP-NET-2007-10-20 (Network Economics)
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