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Access by Capacity and Peak-Load Pricing

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  • Joan Calzada Aymerich

    (Universitat de Barcelona)

Abstract

Several European telecommunications regulatory agencies have recently introduced a fixed capacity charge (flat rate) to regulate access to the incumbents network. The purpose of this paper is to show that the optimal capacity charge and the optimal access-minute charge analysed by Armstrong, Doyle, and Vickers (1996) have a similar structure and imply the same payment for the entrant. I extend the analysis to the case where there is a competitor with market power. In this case, the optimal capacity charge should be modified to avoid that the entrant cream-skims the market, fixing a longer or a shorter peak period than the optimal. Finally, I consider a multiproduct setting, where the effect of the product differentiation is exacerbated.

Suggested Citation

  • Joan Calzada Aymerich, 2003. "Access by Capacity and Peak-Load Pricing," Working Papers in Economics 108, Universitat de Barcelona. Espai de Recerca en Economia.
    • Handle: RePEc:bar:bedcje:2003108
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    References listed on IDEAS

    as
    1. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
    2. Burness, H Stuart & Patrick, Robert H, 1991. "Peak-Load Pricing with Continuous and Interdependent Demand," Journal of Regulatory Economics, Springer, vol. 3(1), pages 69-88, March.
    3. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    4. Craven, John, 1985. "Peak-Load Pricing and Short-run Marginal Cost," Economic Journal, Royal Economic Society, vol. 95(379), pages 778-780, September.
    5. Cave, Martin, 1994. "Interconnection issues in UK telecommunications," Utilities Policy, Elsevier, vol. 4(3), pages 215-222, July.
    6. Robert E. Dansby, 1978. "Capacity Constrained Peak Load Pricing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(3), pages 387-398.
    7. Lewis, Tracy R. & Sappington, David E. M., 1999. "Access pricing with unregulated downstream competition," Information Economics and Policy, Elsevier, vol. 11(1), pages 73-100, March.
    8. Crew, Michael A & Kleindorfer, Paul R & Smith, Marc A, 1990. "Peak-Load Pricing in Postal Services," Economic Journal, Royal Economic Society, vol. 100(402), pages 793-807, September.
    9. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    10. Crew, Michael A & Fernando, Chitru S & Kleindorfer, Paul R, 1995. "The Theory of Peak-Load Pricing: A Survey," Journal of Regulatory Economics, Springer, vol. 8(3), pages 215-248, November.
    11. 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.
    12. Griffin, James M & Mayor, Thomas H, 1987. "The Welfare Gain from Efficient Pricing of Local Telephone Services," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 465-487, October.
    13. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
    14. Koschat, Martin A & Srinagesh, Padmanabhan & Uhler, Linda J, 1995. "Efficient Price and Capacity Choices under Uncertain Demand: An Empirical Analysis," Journal of Regulatory Economics, Springer, vol. 7(1), pages 5-26, January.
    15. Michael Reutter, 2001. "Regulation and Internet Access in Germany," CESifo Working Paper Series 480, CESifo.
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    Cited by:

    1. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española / Review of Public Economics, IEF, vol. 173(2), pages 85-125, June.
    2. Joan Calzada, 2007. "Capacity-based versus time-based access charges in telecommunications," Journal of Regulatory Economics, Springer, vol. 32(2), pages 153-172, October.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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