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Calling vs Receiving Party Pays: Market Penetration and the Importance of the Call Externality

  • Tommaso Majer

    ()

  • Michele Pistollato

    ()

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    In this paper we study how the access price affects the choice of the tariff regime taken by the network operators. We show that for high values of the access price, that is taken as a parameter by the firms, networks decide to charge only the callers. Otherwise, for low values of the access charge, networks charge also the receivers. Moreover, we compare market penetration and total welfare between the two price regimes. Our model suggests that, for high values of call externality, market penetration and total welfare are larger in Receiving Party Pays regime when the access charge is close to zero.

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    File URL: http://pareto.uab.es/wp/2010/84510.pdf
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    Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 845.10.

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    Length: 32
    Date of creation: 26 Oct 2010
    Date of revision:
    Handle: RePEc:aub:autbar:845.10
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