A retail benchmarking approach to efficient two-way access pricing
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 linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: for instance, we show that both static and dynamic e±ciency can be achieved at the same time.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1055.
Date of creation: Oct 2007
Date of revision:
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Web page: http://www.econ.upf.edu/
Networks; Access Pricing; Interconnection; Competition Policy; Telecommunications; Investment;
Other versions of this item:
- Doh-Shin Jeon & Sjaak Hurkens, 2007. "A Retail Benchmarking Approach to Eficient Two-Way Access Pricing," UFAE and IAE Working Papers 717.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- 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-2007-11-03 (All new papers)
- NEP-COM-2007-11-03 (Industrial Competition)
- NEP-LAW-2007-11-03 (Law & Economics)
- NEP-MIC-2007-11-03 (Microeconomics)
- NEP-NET-2007-11-03 (Network Economics)
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- Hurkens, Sjaak & Jeon, Doh-Shin, 2009.
"Mobile Termination and Mobile Penetration,"
TSE Working Papers
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- 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.
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