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Two-way Interconnection with Partial Consumer Participation

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  • Schiff, Aaron

Abstract

This paper incorporates partial consumer participation in a model of competition between telecommunications networks with two-way interconnection. It is shown, in contrast to the results of similar models with full participation, that the firms' equilibrium profits depend on the level of a reciprocal access charge under two-part retail pricing. Under some simplifying assumptions, it is shown that firms prefer the access charge be set equal to the marginal cost of termination, which coincides with the social optimum. Without these additional assumptions the model is analytically complex and simulation results are presented that suggest firms prefer the access charge to be less than marginal cost, while the socially optimal access charge may be above or below cost depending on the differentiation of the firms.

Suggested Citation

  • Schiff, Aaron, 2001. "Two-way Interconnection with Partial Consumer Participation," Working Papers 139, Department of Economics, The University of Auckland.
    • Handle: RePEc:auc:wpaper:139
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    File URL: http://hdl.handle.net/2292/139
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    Cited by:

    1. Kemppainen, Kari, 2005. "Assessing effects of price regulation in retail payment systems," Research Discussion Papers 19/2005, Bank of Finland.
    2. Kemppainen, Kari, 2005. "Assessing effects of price regulation in retail payment systems," Bank of Finland Research Discussion Papers 19/2005, Bank of Finland.
    3. repec:zbw:bofrdp:2005_019 is not listed on IDEAS

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    Keywords

    Economics;

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