IDEAS home Printed from https://ideas.repec.org/p/unl/unlfep/wp568.html
   My bibliography  Save this paper

The ambivalence of two-part tariffs for bottleneck access

Author

Listed:
  • Steffen Hoernig
  • Ingo Vogelsang

Abstract

Two-part tariffs, when used at the retail level, increase efficiency by lowering the price of marginal units. The same potential for higher efficiency exists for two-part tariffs at wholesale level for a given market structure, but the fixed part of the wholesale tariff can negatively affect the latter. In a simulated competition model of next-generation telecommunications access networks that has been calibrated with engineering cost data, we show that the latter effects strongly outweigh the former. That is, substituting a cost-based linear wholesale access tariff with revenue-equivalent two-part tariffs reduces the number of access seekers and therefore leads to higher prices and lower welfare and consumer surplus.

Suggested Citation

  • Steffen Hoernig & Ingo Vogelsang, 2012. "The ambivalence of two-part tariffs for bottleneck access," Nova SBE Working Paper Series wp568, Universidade Nova de Lisboa, Nova School of Business and Economics.
    • Handle: RePEc:unl:unlfep:wp568
    as

    Download full text from publisher

    File URL: https://run.unl.pt/bitstream/10362/11162/1/wp568.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Panzar, J. C. & Sibley, D. S., 1989. "Optimal two-part tariffs for inputs : The case of imperfect competition," Journal of Public Economics, Elsevier, vol. 40(2), pages 237-249, November.
    2. Kenneth Fjell & Øystein Foros & Debashis Pal, 2010. "Endogenous Average Cost Based Access Pricing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(2), pages 149-162, March.
    3. Ordover, Janusz A & Panzar, John C, 1982. "On the Nonlinear Pricing of Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 659-675, October.
    4. Valletti, Tommaso, 1998. "Two-part access pricing and imperfect competition," Information Economics and Policy, Elsevier, vol. 10(3), pages 305-323, September.
    5. von Ungern-Sternberg, Thomas, 1991. "Monopolistic Competition on the Pyramid," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 355-368, June.
    6. Robert D. Willig, 1978. "Pareto-Superior Nonlinear Outlay Schedules," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 56-69, Spring.
    7. Federico Boffa & John Panzar, 2012. "Bottleneck co-ownership as a regulatory alternative," Journal of Regulatory Economics, Springer, vol. 41(2), pages 201-215, April.
    8. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    9. Tilman Klumpp & Xuejuan Su, 2010. "Open Access and Dynamic Efficiency," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 64-96, May.
    10. Roman Inderst & Greg Shaffer, 2009. "Market power, price discrimination, and allocative efficiency in intermediate‐goods markets," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 658-672, December.
    11. Vogelsang, Ingo, 2001. "Price Regulation for Independent Transmission Companies," Journal of Regulatory Economics, Springer, vol. 20(2), pages 141-165, September.
    12. Brito, Duarte & Pereira, Pedro & Vareda, João, 2010. "Can two-part tariffs promote efficient investment on next generation networks?," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 323-333, May.
    13. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    14. Hoernig, Steffen & Jay, Stephan & Neumann, Karl-Heinz & Peitz, Martin & Plückebaum, Thomas & Vogelsang, Ingo, 2012. "The impact of different fibre access network technologies on cost, competition and welfare," Telecommunications Policy, Elsevier, vol. 36(2), pages 96-112.
    15. Janusz A. Ordover & John C. Panzar, 1980. "On the Nonexistence of Pareto Superior Outlay Schedules," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 351-354, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Inderst, Roman & Peitz, Martin, 2014. "Investment under uncertainty and regulation of new access networks," Information Economics and Policy, Elsevier, vol. 26(C), pages 28-41.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vareda, João, 2010. "Access regulation under asymmetric information about the entrant's efficiency," Information Economics and Policy, Elsevier, vol. 22(2), pages 192-199, May.
    2. Michael Polemis & Konstantinos Eleftheriou, 2018. "To Regulate Or To Deregulate? The Role Of Downstream Competition In Upstream Monopoly Vertically Linked Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 70(1), pages 51-63, January.
    3. João Vareda, 2011. "Quality upgrades and bypass under mandatory access," Journal of Regulatory Economics, Springer, vol. 40(2), pages 177-197, October.
    4. Amrstong, Mark & Cowan, Simon & Vickers, John, 1995. "Nonlinear pricing and price cap regulation," Journal of Public Economics, Elsevier, vol. 58(1), pages 33-55, September.
    5. Keizo Mizuno & Ichiro Yoshino, 2015. "Overusing a bypass under cost-based access regulation: underinvestment with spillovers," Journal of Regulatory Economics, Springer, vol. 47(1), pages 29-57, February.
    6. Inderst, Roman & Peitz, Martin, 2012. "Network investment, access and competition," Telecommunications Policy, Elsevier, vol. 36(5), pages 407-418.
    7. Ingo Vogelsang, 2006. "Electricity Transmission Pricing and Performance-based Regulation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 97-126.
    8. Kenneth Fjell & Øystein Foros & Hans Jarle Kind, 2015. "On the Choice of Royalty Rule to Cover Fixed Costs in Input Joint Ventures," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(3), pages 393-406, November.
    9. Herweg, Fabian & Müller, Daniel, 2016. "Discriminatory nonlinear pricing, fixed costs, and welfare in intermediate-goods markets," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 107-136.
    10. Kenneth Fjell & Debashis Pal & David Sappington, 2013. "On the performance of endogenous access pricing," Journal of Regulatory Economics, Springer, vol. 44(3), pages 237-250, December.
    11. Tilman Klumpp & Xuejuan Su, 2015. "Strategic Investment under Open Access: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 495-521, September.
    12. Shana Cui & David E. M. Sappington, 2021. "Access pricing in network industries with mixed oligopoly," Journal of Regulatory Economics, Springer, vol. 59(3), pages 193-225, June.
    13. Panzar John, 2011. "Postal Service Pricing Incentives Following the Introduction of Price Cap Regulation," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-26, September.
    14. Tselekounis, Markos & Varoutas, Dimitris & Martakos, Drakoulis, 2014. "A CDS approach to induce facilities-based competition over NGA networks," Telecommunications Policy, Elsevier, vol. 38(3), pages 311-331.
    15. Inderst Roman & Peitz Martin, 2012. "Market Asymmetries and Investments in Next Generation Access Networks," Review of Network Economics, De Gruyter, vol. 11(1), pages 1-27, March.
    16. Evangelinos, Christos, 2013. "Infrastrukturpreise: Eine normativ-theoretische Analyse," Discussion Papers 1/2013, Technische Universität Dresden, "Friedrich List" Faculty of Transport and Traffic Sciences, Institute of Transport and Economics.
    17. Hoernig, Steffen & Jay, Stephan & Neumann, Karl-Heinz & Peitz, Martin & Plückebaum, Thomas & Vogelsang, Ingo, 2012. "The impact of different fibre access network technologies on cost, competition and welfare," Telecommunications Policy, Elsevier, vol. 36(2), pages 96-112.
    18. Gianpaolo Rossini & Cecilia Vergari, 2014. "The Discrete Charm of Uniform Linear Pricing of an Input Production Joint Venture," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 8(2), pages 68-83, October.
    19. Vareda João & Hoernig Steffen, 2010. "Racing for Investment under Mandatory Access," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-31, July.
    20. Inderst, Roman & Peitz, Martin, 2011. "Netzzugang, Wettbewerb und Investitionen," ZEW Discussion Papers 11-025, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unl:unlfep:wp568. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Susana Lopes (email available below). General contact details of provider: https://edirc.repec.org/data/feunlpt.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.