Regulating Prices in Two-Sided Markets: The Waterbed Experience in Mobile Telephony
Telecommunications Policy (2012, Vol. 36, Issue 5, pp. 360-368)
19 Pages Posted: 19 Jan 2016
Date Written: December 1, 2011
The distinguishing feature of two-sided markets is that the pricing structure, that is, the relative prices charged to each side, matters. Regulators need to understand and account for the interdependence of prices in both sides. Some interventions that lower the prices on one side can result in higher prices on the other side of such markets. This article reviews the recent literature analyzing this waterbed phenomenon in mobile telephony and draws some more general lessons for policy interventions in two-sided markets.
Keywords: Mobile telephony, two-sided markets, termination rates, waterbed effect
JEL Classification: D12, D43, L5, L96
Suggested Citation: Suggested Citation