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A simple access pricing rule to achieve the Ramsey outcome for interconnected networks


  • Doh-Shin Jeon


This paper considers a general and informationally efficient approach to determine the optimal access pricing rule for interconnected networks. It shows that there exists a simple rule that achieves the Ramsey outcome as the unique equilibrium when networks compete in linear prices without network-based price discrimination. The approach is informationally efficient in the sense that the regulator is required to know only the marginal cost structure, i.e. the marginal cost of making and terminating a call. The approach is general in that access prices can depend not only on the marginal costs but also on the retail prices, which can be observed by consumers and therefore by the regulator as well. In particular, I consider the set of linear access pricing rules which includes any fixed access price, the Efficient Component Pricing Rule (ECPR) and the Modified ECPR as special cases. I show that in this set, there is a unique rule that implements the Ramsey outcome as the unique equilibrium independently of the underlying demand conditions.

Suggested Citation

  • Doh-Shin Jeon, 2005. "A simple access pricing rule to achieve the Ramsey outcome for interconnected networks," Economics Working Papers 808, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2005.
  • Handle: RePEc:upf:upfgen:808

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    References listed on IDEAS

    1. Gans, Joshua S. & King, Stephen P., 2000. "Mobile network competition, customer ignorance and fixed-to-mobile call prices," Information Economics and Policy, Elsevier, vol. 12(4), pages 301-327, December.
    2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    3. Doganoglu, Toker & Tauman, Yair, 2002. "Network Competition and Access Charge Rules," Manchester School, University of Manchester, vol. 70(1), pages 16-35, January.
    4. Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
    5. 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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    Cited by:

    1. Stennek, Johan & Tangerås, Thomas, 2006. "Competition vs. Regulation in Mobile Telecommunications," Working Paper Series 685, Research Institute of Industrial Economics.
    2. Doh-Shin Jeon & Sjaak Hurkens, 2007. "A Retail Benchmarking Approach to Efficient Two-way Access Pricing: Two-Part Tariffs," Working Papers 07-11, NET Institute, revised Sep 2007.
    3. Doh-Shin Jeon & Sjaak Hurkens, 2007. "A Retail Benchmarking Approach to Efficient Two-Way Access Pricing," Working Papers 324, Barcelona Graduate School of Economics.
    4. Doh-Shin Jeon & Sjaak Hurkens, 2008. "A retail benchmarking approach to efficient two-way access pricing: no termination-based price discrimination-super-†," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 822-849.

    More about this item


    Networks; Access Pricing; Interconnection; Competition Policy;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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