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Two-way interconnection and the collusive role of the access charge

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  • Ulrich Berger

    (Vienna University of Economics)

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    Abstract

    I show that under network competition with termination-based price discrimination access charges below marginal cost may be used as a collusion device, if the utility of receiving calls is accounted for. This holds even for linear prices and sharply contrasts recent results in the literature suggesting that collusion over the access charge might result in a markup on cost. Moreover, "bill and keep" arrangements may be welfare improving compared with cost-based access pricing.

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    File URL: http://128.118.178.162/eps/io/papers/0303/0303011.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Industrial Organization with number 0303011.

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    Length: 24 pages
    Date of creation: 25 Mar 2003
    Date of revision:
    Handle: RePEc:wpa:wuwpio:0303011

    Note: Type of Document - pdf-file; pages: 24; figures: included
    Contact details of provider:
    Web page: http://128.118.178.162

    Related research

    Keywords: Network Competition; Two-Way Interconnection; Access Charge; Call Externality;

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    References

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    1. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
    2. Brennan, Timothy J., 1997. "Industry parallel interconnection agreements," Information Economics and Policy, Elsevier, vol. 9(2), pages 133-149, June.
    3. Laffont, Jean-Jacques & Rey, Patrick & Tirole, Jean, 1997. "Competition between telecommunications operators," European Economic Review, Elsevier, vol. 41(3-5), pages 701-711, April.
    4. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
    5. Doh-Shin Jeon & Jean-Jacques Laffont & Jean Tirole, 2004. "On the Receiver-Pays Principle," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 85-110, Spring.
    6. Kim, Jeong-Yoo & Lim, Yoonsung, 2001. "An economic analysis of the receiver pays principle," Information Economics and Policy, Elsevier, vol. 13(2), pages 231-260, June.
    7. Gans, J.S. & King, S.P., 2000. "Using 'Bill and Keep' Interconnect Arrangements to Soften Network Competiti on," Department of Economics - Working Papers Series 739, The University of Melbourne.
    8. Economides, N. & Lopomo, G. & Woroch, G., 1996. "Regulatory Rules to Neutralize Network Dominance," Working Papers 96-14, New York University, Leonard N. Stern School of Business, Department of Economics.
    9. Economides, Nicholas & Lopomo, Giuseppe & Woroch, Glenn, 1996. "Regulatory Pricing Rules to Neutralize Network Dominance," Industrial and Corporate Change, Oxford University Press, vol. 5(4), pages 1013-28.
    10. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, December.
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