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Mobile Termination and Consumer Expectations Under the Receiver-Pays Regime

34 Pages Posted: 20 Oct 2010 Last revised: 7 Sep 2014

Sjaak Hurkens

Institute for Economic Analysis-CSIC; Barcelona GSE

Angel Luis Lopez

University of Navarra - School of Economics; IESE Business School

Date Written: September 30, 2010

Abstract

We analyze how termination charges a ect 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-ful lling expectations and do not allow for negative reception charges. Firms only charge for receiving calls when the termination charge is below cost. We recon rm the nding of pro t neutrality when rms cannot use termination-based price discrimination. When rms can use termination-based price discrimination pro ts 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

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

J.P.M. (Sjaak) Hurkens (Contact Author)

Institute for Economic Analysis-CSIC

campus UAB
Bellaterra, 08193
Spain

Barcelona GSE ( email )

Barcelona
Spain
(34-93) 5806612 (Phone)
(34-93) 5801452 (Fax)

Angel Luis Lopez

University of Navarra - School of Economics ( email )

Universidad de Navarra
Campus Universitario
Pamplona, 31009
Spain

IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain
+ 34 932534200 (ext. 4554) (Phone)

HOME PAGE: http://www.angelluislopez.net

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