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On access pricing with network externalities

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  • Demetrius Yannelis

Abstract

It has been argued that access charges may be set optimally by applying the Efficient Component Pricing Rule (ECPR). The paper analyzes the optimality properties of the ECPR in the presence of network externalities in the telecommunications sector. It is assumed that network externalities in the fixed telephony, which is operated by an incumbent monopoly, may arise from the increase in the number of subscribers of a mobile carrier that seeks interconnection to the fixed network. It is shown that the optimality properties of the ECPR that may exist under some restrictive assumptions, do not hold in the presence of network externalities. Specifically, the ECPR may take into account the social opportunity cost with the entry of the competitor, but it fails to incorporate the social benefit accrued to consumers of the fixed telephony when network externalities are present. Copyright International Atlantic Economic Society 2002

Suggested Citation

  • Demetrius Yannelis, 2002. "On access pricing with network externalities," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(2), pages 186-190, June.
    • Handle: RePEc:kap:atlecj:v:30:y:2002:i:2:p:186-190
    DOI: 10.1007/BF02299161
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    1. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
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    4. J. Gregory Sidak & William Baumol, 1994. "Toward Competition in Local Telephony," Books, American Enterprise Institute, number 52984, September.
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    6. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
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    Cited by:

    1. Richard Gretz, 2010. "Console Price and Software Availability in the Home Video Game Industry," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(1), pages 81-94, March.

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