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Bill-and-Keep vs. Cost-Based Access Pricing Revisited

  • Ulrich Berger

    (Wirtschaftsuniversität Wien)

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    We study network competition with two-part tariffs and termination-based price discrimination in the presence of call externalities. We show that both the collusive and the welfare maximizing access charges fall below marginal cost. Moreover, bill-and-keep arrangements are welfare improving compared with cost-based access pricing.

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    File URL: http://128.118.178.162/eps/io/papers/0408/0408002.pdf
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    Paper provided by EconWPA in its series Industrial Organization with number 0408002.

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    Length: 10 pages
    Date of creation: 06 Aug 2004
    Date of revision:
    Handle: RePEc:wpa:wuwpio:0408002
    Note: Type of Document - pdf; pages: 10
    Contact details of provider: Web page: http://128.118.178.162

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    1. 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.
    2. Ulrich Berger, 2004. "Access Charges in the Presence of Call Externalities," Industrial Organization 0408009, EconWPA, revised 31 Aug 2004.
    3. 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.
    4. Jong-Hee Hahn, 2000. "Nonlinear Pricing of Telecommunications with Call and Network Externalities," Keele Department of Economics Discussion Papers (1995-2001) 2000/15, Department of Economics, Keele University, revised Nov 2001.
    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.
    6. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
    7. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    8. Berger Ulrich, 2005. "Access Charges in the Presence of Call Externalities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
    9. Cambini, Carlo & Valletti, Tommaso M., 2003. "Network competition with price discrimination: 'bill-and-keep' is not so bad after all," Economics Letters, Elsevier, vol. 81(2), pages 205-213, November.
    10. Patrick Degraba, 2003. "Efficient Intercarrier Compensation for Competing Networks When Customers Share the Value of A Call," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 207-230, 06.
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