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Price distortion under fixed-mobile substitution

Listed author(s):
  • Marc Bourreau

    ()

  • Carlo Cambini

    ()

  • Steffen Hoernig

    ()

This paper analyses the impact of substitution between fixed and mobile telephony on call prices. We develop a model where consumers differ in the benefits of mobility and firms price discriminate between on-net and off-net calls. We find that call prices are distorted downwards due to substitution possibilities and customer heterogeneity, and that this distortion increases with the fixed-mobile termination mark-up. Copyright Associazione Amici di Economia e Politica Industriale 2015

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File URL: http://hdl.handle.net/10.1007/s40812-015-0017-2
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Article provided by Springer & Associazione Amici di Economia e Politica Industriale in its journal Economia e Politica Industriale.

Volume (Year): 42 (2015)
Issue (Month): 4 (December)
Pages: 441-454

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Handle: RePEc:spr:epolin:v:42:y:2015:i:4:p:441-454
DOI: 10.1007/s40812-015-0017-2
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  1. I. Vogelsang, 2015. "Will the U.S. and EU telecommunications policies converge? A survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(2), pages 117-155, June.
  2. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
  3. 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.
  4. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
  5. Hoernig, Steffen, 2007. "On-net and off-net pricing on asymmetric telecommunications networks," Information Economics and Policy, Elsevier, vol. 19(2), pages 171-188, June.
  6. Pio Baake & Kay Mitusch, 2009. "Mobile phone termination charges with asymmetric regulation," Journal of Economics, Springer, vol. 96(3), pages 241-261, April.
  7. Gruber, Harald & Verboven, Frank, 2001. "The diffusion of mobile telecommunications services in the European Union," European Economic Review, Elsevier, vol. 45(3), pages 577-588, March.
  8. 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.
  9. 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.
  10. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, 06.
  11. Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November.
  12. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
  13. 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.
  14. Cambini, Carlo & Valletti, Tommaso M., 2003. "Network competition with price discrimination: 'bill-and-keep' is not so bad after all," Economics Letters, Elsevier, vol. 81(2), pages 205-213, November.
  15. Wolfgang Briglauer & Anton Schwarz & Christine Zulehner, 2011. "Is fixed-mobile substitution strong enough to de-regulate fixed voice telephony? Evidence from the Austrian markets," Journal of Regulatory Economics, Springer, vol. 39(1), pages 50-67, February.
  16. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
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