This is an analysis of a mature, deregulated telecommunications market
where two symmetric networks compete for final consumers but cooperate
in setting the price for access to each other’s customers. If consumers’ calling
patterns are sufficiently biased towards their peer groups, and if the
networks can price-discriminate according to where calls terminate, then
a negotiated, reciprocal access charge can support collusion in the final
market. Access fees directly affect the price of calls to the rival network,
creating network externalities and allowing the firms to differentiate their
products endogenously. In particular, there is a shared-market equilibrium
with a positive markup on calls to the other network, profits approaching
the cartel level, and a loss in total welfare. A ban on termination-based
price discrimination restores the first-best outcome without further regulatory
intervention.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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