Foreclosing competition through access charges and price discrimination
This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist on the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough.
|Date of creation:||09 Jul 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.iese.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gans, Joshua S. & King, Stephen P., 2001.
"Using 'bill and keep' interconnect arrangements to soften network competition,"
Elsevier, vol. 71(3), pages 413-420, June.
- Gans, J.S. & King, S.P., 2000. "Using 'Bill and Keep' Interconnect Arrangements to Soften Network Competiti on," Department of Economics - Working Papers Series 739, The University of Melbourne.
- Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February.
- Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages F270-F307, 06.
- Christos Genakos & Tommaso Valletti, 2007.
"Testing the "waterbed" effect in mobile telephony,"
LSE Research Online Documents on Economics
19680, London School of Economics and Political Science, LSE Library.
- Christos Genakos & Tommaso Valletti, 2007. "Testing the "Waterbed" Effect in Mobile Telephony," CEP Discussion Papers dp0827, Centre for Economic Performance, LSE.
- Christos Genakos & Tommaso Valletti, 2008. "Testing the “Waterbed” Effect in Mobile Telephony," CEIS Research Paper 110, Tor Vergata University, CEIS, revised 11 Jul 2008.
- Genakos, Christos D. & Valletti, Tommaso, 2009. "Testing the "Waterbed" Effect in Mobile Telephony," CEPR Discussion Papers 7611, C.E.P.R. Discussion Papers.
- Matutes, Carmen & Vives, Xavier, 1996. "Competition for Deposits, Fragility, and Insurance," Journal of Financial Intermediation, Elsevier, vol. 5(2), pages 184-216, April.
- Hoernig, Steffen, 2006.
"On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks,"
CEPR Discussion Papers
5588, C.E.P.R. Discussion Papers.
- 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.
- de Bijl, P.W.J. & Peitz, M., 2004.
"Dynamic Regulation and Entry in Telecommunications Markets : A Policy Framework,"
2004-010, Tilburg University, Tilburg Law and Economic Center.
- de Bijl, Paul W. J. & Peitz, Martin, 2004. "Dynamic regulation and entry in telecommunications markets: a policy framework," Information Economics and Policy, Elsevier, vol. 16(3), pages 411-437, September.
- Calzada, Joan & Valletti, Tommaso, 2005.
"Network Competition and Entry Deterrence,"
CEPR Discussion Papers
5381, C.E.P.R. Discussion Papers.
- Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
- Steffen Hoernig & Roman Inderst & Tommaso Valletti, 2014.
"Calling circles: network competition with nonuniform calling patterns,"
RAND Journal of Economics,
RAND Corporation, vol. 45(1), pages 155-175, 03.
- Hoernig, Steffen & Inderst, Roman & Valletti, Tommaso, 2010. "Calling Circles: Network Competition with Non-Uniform Calling Patterns," CEPR Discussion Papers 8114, C.E.P.R. Discussion Papers.
- Steffen Hoernig & Roman Inderst & Tommaso Valletti, 2011. "Calling Circles: Network Competition with Non-Uniform Calling Patterns," CEIS Research Paper 206, Tor Vergata University, CEIS, revised 04 Jul 2011.
- 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.
- repec:cup:cbooks:9780521066631 is not listed on IDEAS
- Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0801. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noelia Romero)
If references are entirely missing, you can add them using this form.