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Information Exchange and Competition in Communications Networks

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  • Valletti, Tommaso
  • Cambini, Carlo

Abstract

We develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete for such users by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off-net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also show that a ?bill-and-keep? system over access charges can approximate an efficient regime and we discuss when this system emerges from private negotiations.

Suggested Citation

  • Valletti, Tommaso & Cambini, Carlo, 2005. "Information Exchange and Competition in Communications Networks," CEPR Discussion Papers 5031, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5031
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    1. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
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    12. 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.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Interconnection; Access charges; Reception charges; Bill-and-keep; Information exchange;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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