Interconnection, Termination-Based Price Discrimination, and Network Competition in a Mature Telecommunications Market

Cherdron, Malte

Document Type: Working paper
Year of publication: 2000
The title of a journal, publication series: GK Working Paper Series
Volume: 00-03
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Graduiertenkolleg VWL/BWL
Subject: 330 Economics
Abstract: 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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