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Two-way interconnection and the collusive role of the access charge

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  • Ulrich Berger

    (Vienna University of Economics)

Abstract

I show that under network competition with termination-based price discrimination access charges below marginal cost may be used as a collusion device, if the utility of receiving calls is accounted for. This holds even for linear prices and sharply contrasts recent results in the literature suggesting that collusion over the access charge might result in a markup on cost. Moreover, "bill and keep" arrangements may be welfare improving compared with cost-based access pricing.

Suggested Citation

  • Ulrich Berger, 2003. "Two-way interconnection and the collusive role of the access charge," Industrial Organization 0303011, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:0303011
    Note: Type of Document - pdf-file; pages: 24; figures: included
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    References listed on IDEAS

    as
    1. Brennan, Timothy J., 1997. "Industry parallel interconnection agreements," Information Economics and Policy, Elsevier, vol. 9(2), pages 133-149, June.
    2. Economides, N. & Lopomo, G. & Woroch, G., 1996. "Regulatory Rules to Neutralize Network Dominance," Working Papers 96-14, New York University, Leonard N. Stern School of Business, Department of Economics.
    3. Kim, Jeong-Yoo & Lim, Yoonsung, 2001. "An economic analysis of the receiver pays principle," Information Economics and Policy, Elsevier, vol. 13(2), pages 231-260, June.
    4. Laffont, Jean-Jacques & Rey, Patrick & Tirole, Jean, 1997. "Competition between telecommunications operators," European Economic Review, Elsevier, vol. 41(3-5), pages 701-711, April.
    5. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-564, May.
    6. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, April.
    7. Doh-Shin Jeon & Jean-Jacques Laffont & Jean Tirole, 2004. "On the Receiver-Pays Principle," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 85-110, Spring.
    8. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(1), pages 1-25, February.
    9. Economides, Nicholas & Lopomo, Giuseppe & Woroch, Glenn, 1996. "Regulatory Pricing Rules to Neutralize Network Dominance," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 5(4), pages 1013-1028.
    10. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
    11. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Network Competition; Two-Way Interconnection; Access Charge; Call Externality;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

    NEP fields

    This paper has been announced in the following NEP Reports:

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