On the Economics of Callback Services

This paper investigates the economic effects of callback services, an issue which has previously brought much disputes and conflicts. Whereas the existence of callback services has been attributed to a rate disparity between countries, we show that it can arise either from the inefficiency of domestic markets or from the accounting rate which is far from cost-based. Although callback service is an inefficient means of utilizing resources, its introduction may lead the international telephony markets in an efficient direction when inefficiencies exist in the market. It also helps us understand why conflicts occur among the agents with respect to the legitimacy of callback services by comparing the international telephony markets before and after the introduction of callback services.