Competition in telecommunication networks with call externalities |
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Authors: | Edmond Baranes Laurent Flochel |
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Institution: | (1) LASER, Faculté de sciences économiques, University of Montpellier I, Avenue de la mer, CS 79606, Montpellier Cedex 2, 34960, France;(2) GATE, University of Lyon 2, Lyon, France |
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Abstract: | This paper describes a model involving two interconnected networks offering different degrees of quality. In these networks,
there are call externalities enabling consumers to assess the quality of the calls they send and receive. Networks compete
in two-part tariffs. Our aim is to show that the “profit neutrality” result no longer applies due to network asymmetry and
call externalities. In the case of non reciprocal access charges, call externalities generate private incentives enabling
each competitor to charge low access prices. This reduces the risk of tacit collusion as competitors are free to negotiate
their access charges.
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Keywords: | Networks competition Call externalities Access price |
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