Price Distortion Under Fixed-Mobile Substitution
FEUNL Working Paper Series No. 594
20 Pages Posted: 11 Jul 2015
Date Written: June 29, 2015
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: Suggested Citation