Price Distortion Under Fixed-Mobile Substitution

FEUNL Working Paper Series No. 594

20 Pages Posted: 11 Jul 2015

See all articles by Marc Bourreau

Marc Bourreau

Telecom ParisTech

Carlo Cambini

Politecnico di Torino & EUI - Florence School of Regulation; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Steffen Hoernig

Nova SBE, Universidade Nova de Lisboa

Date Written: June 29, 2015

Abstract

This paper analyses the impact of substitution between fixed and mobile telephony on call prices. We develop a model where consumers differ in the benefits of mobility and firms price discriminate between on-net and off-net calls. We find that call prices are distorted downwards due to substitution possibilities and customer heterogeneity, and that this distortion increases with the fixed-mobile termination mark-up.

Keywords: Network competition, Fixed-mobile substitution, Price discrimination

JEL Classification: L51, L92

Suggested Citation

Bourreau, Marc and Cambini, Carlo and Hoernig, Steffen, Price Distortion Under Fixed-Mobile Substitution (June 29, 2015). FEUNL Working Paper Series No. 594, Available at SSRN: https://ssrn.com/abstract=2628806 or http://dx.doi.org/10.2139/ssrn.2628806

Marc Bourreau

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Carlo Cambini

Politecnico di Torino & EUI - Florence School of Regulation ( email )

Corso Duca degli Abruzzi, 24
Torino, Torino 10129
Italy
+390115647292 (Phone)
+390115647299 (Fax)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Steffen Hoernig (Contact Author)

Nova SBE, Universidade Nova de Lisboa ( email )

Campus De Carcavelos
Rua Da Holanda 1
Carcavelos, 2775-405
Portugal
+351-213801600 (Phone)

HOME PAGE: http://https://www2.novasbe.unl.pt/en/faculty-research/faculty/faculty-detail/id/46/steffen-hoernig

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