Access Charges in the Presence of Call Externalities

Publication: Scientific journalJournal articlepeer-review

Abstract

We introduce call externalities in the standard model of network competition with terminationbased price discrimination under a CPP regime, and employ a simple graphical analysis to study the outcome of competition. In contrast to recent results in the literature we find that even under linear pricing, access charges below marginal cost may be used as a collusion device, while offnet calls are priced above on-net calls in equilibrium. Moreover, it turns out that "bill and keep" arrangements may be welfare improving compared with cost based access pricing.
Original languageEnglish
Pages (from-to)1538 - 1645
JournalB.E. Journal of Economic Analysis and Policy
Volume3
Issue number1
DOIs
Publication statusPublished - 2005

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