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'Double marginalization' problems: evidence from the Korean fixed-to-mobile service market

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  • Park, Myeong-Cheol
  • Lee, Sang-Woo

Abstract

In this paper, examination of the possibility of a 'double marginalization' problem existing in the Korean telecommunication industry is conducted and suggestions are made for the provision of a new scheme to eliminate this possibility by changing the pricing system for fixed-to-mobile calls. Based on five key economic characteristics in the Korean mobile market, a simple model for double marginalization in the telecommunication market is introduced. Evidence was found to suggest that a double marginalization problem is likely to exist within Korea's telecommunication industry as it is presently structured, and that this problem is further likely to have an adverse effect on the industry by inflating the price of fixed-to-mobile calls. Two alternatives are proposed to effectively remedy this double marginalization issue. It is also shown that prices of fixed-to-mobile calls could be lowered by changing the caller pays principle into a receiver pays principle.

Suggested Citation

  • Park, Myeong-Cheol & Lee, Sang-Woo, 2002. "'Double marginalization' problems: evidence from the Korean fixed-to-mobile service market," Telecommunications Policy, Elsevier, vol. 26(11), pages 607-621, December.
    • Handle: RePEc:eee:telpol:v:26:y:2002:i:11:p:607-621
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    Cited by:

    1. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2024. "How Does Downstream Firms’ Efficiency Affect Exclusive Supply Agreements?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 219-242, March.
    2. Anil Arya & Brian Mittendorf, 2013. "Managing Strategic Inventories via Manufacturer-to-Consumer Rebates," Management Science, INFORMS, vol. 59(4), pages 813-818, April.

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    Keywords

    Korea Double marginalization Mobile;

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