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

Author

Listed:
  • Ulrich Berger

    (Wirtschaftsuniversität Wien)

Abstract

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.

Suggested Citation

  • Ulrich Berger, 2004. "Bill-and-Keep vs. Cost-Based Access Pricing Revisited," Industrial Organization 0408002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0408002
    Note: Type of Document - pdf; pages: 10
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0408/0408002.pdf
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    References listed on IDEAS

    as
    1. Hahn, Jong-Hee, 2003. "Nonlinear pricing of telecommunications with call and network externalities," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 949-967, September.
    2. 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.
    3. 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.
    4. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    5. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-564, May.
    6. 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.
    7. 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.
    8. Ulrich Berger, 2004. "Access Charges in the Presence of Call Externalities," Industrial Organization 0408009, EconWPA, revised 31 Aug 2004.
    9. 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.
    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, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Access Charge; Bill-and-Keep; Call Externality; Interconnection; Telecommunications;

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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