Calling Circles: Network Competition with Non-Uniform Calling Patterns
32 Pages Posted: 29 Nov 2010
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Calling Circles: Network Competition with Non-Uniform Calling Patterns
Date Written: November 2010
Abstract
We introduce a flexible model of telecommunications network competition with non-uniform calling patterns, which account for the fact that customers tend to make most calls to a small subset of people. Equilibrium call prices are distorted away from marginal cost, and competitive intensity is affected by the concentration of calling patterns. Contrary to previous predictions, jointly profit-maximizing access charges are set above termination cost in order to dampen competition, and the resulting on-net prices are below off-net prices, if calling patterns are sufficiently concentrated.
Keywords: Network competition, Non-uniform calling patterns, Termination charges
JEL Classification: L13, L51
Suggested Citation: Suggested Citation
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Calling Circles: Network Competition with Non-Uniform Calling Patterns
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