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Regulation and Internet Access in Germany

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  • Michael Reutter

Abstract

We explain the recent events in the German market for online access using a model of a regulated monopoly renting phone lines to retailers. Retailers offer either a linear or a flat tariff to consumers. Consumer heterogeneity leads to adverse selectiion. We show why market entry for flatrate firms is difficult under a linear wholesale tariff. With both a linear and a flat wholesale tariff the consumer market shows a mixture of tariffs as well. When marginal costs are zero it is optimal to have a wholesale flatrate only. However, marginal moves towards this equilibrium are not always welfare improving.

Suggested Citation

  • Michael Reutter, 2001. "Regulation and Internet Access in Germany," CESifo Working Paper Series 480, CESifo.
    • Handle: RePEc:ces:ceswps:_480
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp480.pdf
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    References listed on IDEAS

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    1. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    2. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 515-539.
    3. Jeffrey K. MacKie-Mason & Hal Varian, 1994. "Economic FAQs About the Internet," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 75-96, Summer.
    4. Mason, Robin, 2000. "Simple competitive Internet pricing," European Economic Review, Elsevier, vol. 44(4-6), pages 1045-1056, May.
    5. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
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    Cited by:

    1. Joan Calzada Aymerich, 2003. "Access by Capacity and Peak-Load Pricing," Working Papers in Economics 108, Universitat de Barcelona. Espai de Recerca en Economia.
    2. Joan Calzada, 2007. "Capacity-based versus time-based access charges in telecommunications," Journal of Regulatory Economics, Springer, vol. 32(2), pages 153-172, October.

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