Network Competition and Entry Deterrence

22 Pages Posted: 15 Aug 2008

See all articles by Joan Calzada

Joan Calzada

University of Barcelona - Department of Political Economics

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

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Date Written: 0000

Abstract

We develop a model of logit demand that extends the traditional duopoly framework of network competition to a multi-firm industry. First, we show that incumbents establish the reciprocal access charge inefficiently below cost when they compete in prices but they behave efficiently if they compete in utilities. Secondly, we study how incumbents determine the industry-wide access charge under the threat of entry. We show that incumbents may accommodate all possible entrants, only a group of them, or may completely deter entry. When entry deterrence is the preferred option, incumbents distort the access charge upwards.

Suggested Citation

Calzada, Joan and Valletti, Tommaso M., Network Competition and Entry Deterrence (0000). The Economic Journal, Vol. 118, Issue 531, pp. 1223-1244, August 2008. Available at SSRN: https://ssrn.com/abstract=1227170 or http://dx.doi.org/10.1111/j.1468-0297.2008.02167.x

Joan Calzada (Contact Author)

University of Barcelona - Department of Political Economics ( email )

Av. Diagonal, 696
Barcelona, 08034
Spain
+34 93 402 1933 (Phone)
+34 93 402 4573 (Fax)

Tommaso M. Valletti

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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