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Price Discrimination, Entry, And Switching Costs In Network Competition

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  • Dejan Trifunović
  • Đorđe Mitrović

Abstract

This paper reviews theoretical models of network competition in telecommunications. We will discuss two alternative approaches. The first approach assumes Hoteling’s horizontal differentiation and the second approach is based on switching costs. We will first analyse spatial competition with linear prices and continue with price discrimination between onnet and off-net calls. Price discrimination can also be used to deter entry to the market. We will also deal with the regulator’s optimal choice of access price, which should be designed to induce entry of new firms. Furthermore, pricing of roaming services and the switching cost approach to network competition will be considered. Finally, we will illustrate the theoretical results with data from the Serbian mobile and fixed telephony market.

Suggested Citation

  • Dejan Trifunović & Đorđe Mitrović, 2016. "Price Discrimination, Entry, And Switching Costs In Network Competition," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(209), pages 129-160, April - J.
  • Handle: RePEc:beo:journl:v:61:y:2016:i:209:p:129-160
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    References listed on IDEAS

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    More about this item

    Keywords

    telecommunications; spatial competition; access pricing; price discrimination; entry; predatory behaviour; switching costs.;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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