Advanced Search
MyIDEAS: Login to save this paper or follow this series

Network Competition with Reciprocal Proportional Access Charge Rules


Author Info

  • Toker Doganoglu

    (Department of Economics, SUNY Stony Brook)

  • Yair Tauman

    (Department of Economics SUNY Stony Brook and Graduate School of Business Tel-Aviv University)

Registered author(s):


    This paper presents a model of two competing local telecommunications networks, similar in spirit to the model of Laffont, Rey and Tirole(1996). The networks have different attributes which we assume are fixed and the consumers have idiosyncratic tastes for these attributes. The networks are mandated to interconnect and the access charges are determined cooperatively in the first stage. In the second stage, the two network companies are engaged in a price competition to attract consumers. In the third stage, each consumer selects a network and determines the consumption of phone calls. Laffont, Rey and Tirole have shown that except for restrictive scenarios, the local price competition does not result in a pure strategy equilibrium. In this paper, we assume that the two companies choose access charge rules rather than simply access charges. These rules determine the access charges as a function of the future local prices. We show that the family of reciprocal proportional access charge rules generates a pure strategy equilibrium and we discuss its properties.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    Bibliographic Info

    Paper provided by EconWPA in its series Industrial Organization with number 9611001.

    as in new window
    Date of creation: 13 Nov 1996
    Date of revision: 14 Nov 1996
    Handle: RePEc:wpa:wuwpio:9611001

    Note: Latex File
    Contact details of provider:
    Web page:

    Related research


    Find related papers by JEL classification:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
    2. Armstrong, M. & Doyle, C. & Vickers, J., 1995. "The access pricing problem: a synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
    3. Laffont, Jean-Jacques & Tirole, Jean, 1992. "Access Pricing and Competition," IDEI Working Papers 19, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. Nicholas Economides & Lawrence J. White, 1997. "Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?," Industrial Organization 9701003, EconWPA.
    5. Muench, Thomas J., 1988. "Quantum agglomeration formation during growth in a combined economic/gravity model," Journal of Urban Economics, Elsevier, vol. 23(2), pages 199-214, March.
    6. Nicholas S. Economides & Glenn A. Woroch, 1992. "Benefits and Pitfalls of Network Interconnection," Working Papers 92-31, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-56, November.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Shi Zheng & Pei Xu & Zhigang Wang & Shunfeng Song, 2012. "Willingness to pay for traceable pork: evidence from Beijing, China," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(2), pages 200-215, May.
    2. Eduardo Saavedra & Xavier Mancero, . "Entry, Cream Skimming, and Competition: Theory and Simulation for Chile's Local Telephony Market," ILADES-Georgetown University Working Papers inv132, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.


    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:9611001. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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