34 Pages Posted: 20 Oct 2010 Last revised: 7 Sep 2014
Date Written: September 30, 2010
We analyze how termination charges aect retail prices when taking into account that receivers derive some utility from a call and when rms may charge consumers for receiving calls. A novel feature of our paper is that we consider passive self-fullling expectations and do not allow for negative reception charges. Firms only charge for receiving calls when the termination charge is below cost. We reconrm the nding of prot neutrality when rms cannot use termination-based price discrimination. When rms can use termination-based price discrimination prots do depend on the termination charge. When the call externality is strong, rms prefer a below cost termination charge and will use RPP. When the call externality is weak, rms prefer a termination charge above cost. The termination charge that maximizes total welfare is below cost and would induce an RPP regime.
Keywords: Bill and Keep, Call Externality, Access Pricing, Interconnection, Receiver Pays, Consumer Expectations
JEL Classification: D43, K23, L51, L96
Suggested Citation: Suggested Citation
Hurkens, Sjaak and Lopez, Angel Luis, Mobile Termination and Consumer Expectations Under the Receiver-Pays Regime (September 30, 2010). NET Institute Working Paper No. 10-12. Available at SSRN: https://ssrn.com/abstract=1694365 or http://dx.doi.org/10.2139/ssrn.1694365