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Two-way interconnection and the collusive role of the access charge

  • Ulrich Berger

    (Vienna University of Economics)

Registered author(s):

    I show that under network competition with termination-based price discrimination access charges below marginal cost may be used as a collusion device, if the utility of receiving calls is accounted for. This holds even for linear prices and sharply contrasts recent results in the literature suggesting that collusion over the access charge might result in a markup on cost. Moreover, "bill and keep" arrangements may be welfare improving compared with cost-based access pricing.

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    File URL: http://128.118.178.162/eps/io/papers/0303/0303011.pdf
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    Paper provided by EconWPA in its series Industrial Organization with number 0303011.

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    Length: 24 pages
    Date of creation: 25 Mar 2003
    Date of revision:
    Handle: RePEc:wpa:wuwpio:0303011
    Note: Type of Document - pdf-file; pages: 24; figures: included
    Contact details of provider: Web page: http://128.118.178.162

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    1. Kim, Jeong-Yoo & Lim, Yoonsung, 2001. "An economic analysis of the receiver pays principle," Information Economics and Policy, Elsevier, vol. 13(2), pages 231-260, June.
    2. Doh Shin Jeon & Jean Jacques Laffont & Jean Tirole, 2001. "On the receiver pays principle," Economics Working Papers 561, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June.
    4. Economides, N. & Lopomo, G. & Woroch, G., 1996. "Regulatory Rules to Neutralize Network Dominance," Working Papers 96-14, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, June.
    6. Laffont, Jean-Jacques & Rey, Patrick & Tirole, Jean, 1997. "Competition between telecommunications operators," European Economic Review, Elsevier, vol. 41(3-5), pages 701-711, April.
    7. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
    8. Brennan, Timothy J., 1997. "Industry parallel interconnection agreements," Information Economics and Policy, Elsevier, vol. 9(2), pages 133-149, June.
    9. Economides, Nicholas & Lopomo, Giuseppe & Woroch, Glenn, 1996. "Regulatory Pricing Rules to Neutralize Network Dominance," Industrial and Corporate Change, Oxford University Press, vol. 5(4), pages 1013-28.
    10. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
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