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Termination fees revisited

Author

Listed:
  • Jullien, Bruno
  • Rey, Patrick
  • Sand-Zantman, Wilfried

Abstract

We reconsider the question of the optimal level of termination fees between communication networks in the context of heterogeneous usage and elastic participation. The interaction between these two features yields new insights; in our model: i) The profit maximizing reciprocal termination fee is above marginal cost; ii) the welfare maximizing termination fee is also above cost; iii) the welfare-maximizing termination fee is below the profit-maximizing one in the absence of termination-based price discrimination, but can be above it otherwise.

Suggested Citation

  • Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2013. "Termination fees revisited," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 738-750.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:6:p:738-750
    DOI: 10.1016/j.ijindorg.2013.05.006
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    References listed on IDEAS

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    12. Ángel L. López & Patrick Rey, 2009. "Foreclosing Competition through Access Charges and Price Discrimination," Working Papers 2009.99, Fondazione Eni Enrico Mattei.
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    15. Hahn, Jong-Hee, 2004. "Network competition and interconnection with heterogeneous subscribers," International Journal of Industrial Organization, Elsevier, vol. 22(5), pages 611-631, May.
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    17. Joan Calzada & Tommaso M. Valletti, 2008. "Network Competition and Entry Deterrence," Economic Journal, Royal Economic Society, vol. 118(531), pages 1223-1244, August.
    18. 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.
    19. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June.
    20. Berger Ulrich, 2005. "Access Charges in the Presence of Call Externalities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    2. Edmond Baranes & Stefan Behringer & Jean-Christophe Poudou, 2017. "Mobile Access Charges and Collusion under Asymmetry," Annals of Economics and Statistics, GENES, issue 127, pages 33-60.
    3. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    4. Thomas P. Tangerås, 2014. "Network competition with income effects," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 645-673, September.
    5. Hawthorne, Ryan, 2018. "The effects of lower mobile termination rates in South Africa," Telecommunications Policy, Elsevier, vol. 42(5), pages 374-385.
    6. Hurkens, Sjaak & López, Ángel L., 2014. "Who Should Pay for Two-way Interconnection?," IESE Research Papers D/1102, IESE Business School.
    7. Martin Quinn & Miguel Godinho de Matos & Christian Peukert, 2022. "The Welfare Effects of Mobile Internet Access - Evidence from Roam-Like-at-Home," CESifo Working Paper Series 9612, CESifo.
    8. Lee, Dongyeol, 2015. "Regulating termination charges in asymmetric oligopolies," Information Economics and Policy, Elsevier, vol. 32(C), pages 16-28.
    9. Ángel L. López & Patrick Rey, 2016. "Foreclosing Competition Through High Access Charges and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 64(3), pages 436-465, September.
    10. Rohit Prasad & Rupamanjari Ray, 2015. "The relation of traffic balance and network size: a case from the indian mobile industry," Netnomics, Springer, vol. 16(3), pages 149-167, December.
    11. Harrison, Rodrigo & Hernandez, Gonzalo & Muñoz, Roberto, 2019. "A discrete model of market interaction in the presence of social networks and price discrimination," Mathematical Social Sciences, Elsevier, vol. 102(C), pages 48-58.
    12. Chen, Yi-Ting & Sun, Edward W. & Lin, Yi-Bing, 2020. "Merging anomalous data usage in wireless mobile telecommunications: Business analytics with a strategy-focused data-driven approach for sustainability," European Journal of Operational Research, Elsevier, vol. 281(3), pages 687-705.

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    More about this item

    Keywords

    Termination fee; Communication; Network; Mobile;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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