Network competition and interconnection with heterogeneous subscribers
This paper considers competition in a telecommunications industry, where heterogeneous consumers have private information about their preferences for telephone service and firms are allowed to use nonlinear tariffs. Networks, which directly compete for customers, are interconnected and pay access charges to one another. In a symmetric equilibrium, each network’s profit-maximising pricing policy generally involves a distortion in call allocation for all types, except when the (reciprocal) access charge is set equal to the call-termination cost. Under certain conditions, however, the resulting per-firm profit is independent of the access charge, and so the networks have no incentive to collude by choosing an access charge higher (or lower) than its cost. In this case, there is no need for regulatory intervention regarding access charges other than to provide a ‘focal point’ by recommending that the networks set access charges equal to the actual call-termination cost. This policy induces the efficient consumption of calls. Key Words : Two-way Networks, Interconnection, Nonlinear Pricing,Telecommunications Policy.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 27-46, February.
- Nicholas Economides & Giuseppe Lopomo & Glenn Woroch, 2005.
"Strategic Commitments and the Principle of Reciprocity in Interconnection Pricing,"
05-10, New York University, Leonard N. Stern School of Business, Department of Economics.
- Nicholas Economides & Giuseppe Lopomo & Glenn Woroch, 1997. "Strategic Commitments and the Principle of Reciprocity in Interconnection Pricing," Industrial Organization 9701001, EconWPA.
- J-J. Laffont & J. Tirole, 1994.
"Access Pricing and Competition,"
95-11, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jean-Charles Rochet & Jean Triole, 2002.
"Platform Competition in Two Sided Markets,"
FMG Discussion Papers
dp409, Financial Markets Group.
- Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
- Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform competition in two sided markets," LSE Research Online Documents on Economics 24929, London School of Economics and Political Science, LSE Library.
- Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(1), pages 1-25, February.
- Armstrong, Mark, 2004. "Network interconnection with asymmetric networks and heterogeneous calling patterns," Information Economics and Policy, Elsevier, vol. 16(3), pages 375-390, September.
- Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
- repec:eee:ecolet:v:71:y:2001:i:3:p:413-42 is not listed on IDEAS
- Gans, Joshua S. & King, Stephen P., 2001.
"Using 'bill and keep' interconnect arrangements to soften network competition,"
Elsevier, vol. 71(3), pages 413-420, June.
- 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.
- Poletti, Stephen & Wright, Julian, 2004.
"Network interconnection with participation constraints,"
Information Economics and Policy,
Elsevier, vol. 16(3), pages 347-373, September.
- Poletti, Steve & Wright, Julian, 2003. "Network Interconnection with Participation Constraints," Working Papers 211, Department of Economics, The University of Auckland.
- Dessein, Wouter, 2003.
" Network Competition in Nonlinear Pricing,"
RAND Journal of Economics,
The RAND Corporation, vol. 34(4), pages 593-611, Winter.
- Jean-Charles Rochet & Lars A. Stole, 2002. "Nonlinear Pricing with Random Participation," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 277-311.
- Hahn, Jong-Hee, 2003.
"Nonlinear pricing of telecommunications with call and network externalities,"
International Journal of Industrial Organization,
Elsevier, vol. 21(7), pages 949-967, September.
- Jong-Hee Hahn, 2000. "Nonlinear Pricing of Telecommunications with Call and Network Externalities," Keele Department of Economics Discussion Papers (1995-2001) 2000/15, Department of Economics, Keele University, revised Nov 2001.
- Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
- Simon P. Anderson & Stephen Coate, 2003.
"Market Provision of Broadcasting: A Welfare Analysis,"
Virginia Economics Online Papers
358, University of Virginia, Department of Economics.
- Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
- Armstrong, Mark & Doyle, Chris & Vickers, John, 1996.
"The Access Pricing Problem: A Synthesis,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 44(2), pages 131-50, June.
- 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.
- Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
- Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:22:y:2004:i:5:p:611-631. 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: (Shamier, Wendy)
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.