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

See all articles by Christos Genakos

Christos Genakos

Cambridge Judge Business School; Athens University of Economics and Business (AUEB); Center for Economic Policy Research (CEPR); Center for Economic Performance (CEP)

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: December 1, 2011

Abstract

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

Genakos, Christos and Valletti, Tommaso M., Regulating Prices in Two-Sided Markets: The Waterbed Experience in Mobile Telephony (December 1, 2011). Telecommunications Policy (2012, Vol. 36, Issue 5, pp. 360-368). Available at SSRN: https://ssrn.com/abstract=2717955

Christos Genakos (Contact Author)

Cambridge Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Athens University of Economics and Business (AUEB) ( email )

76 Patission Street
Athens, 104 34
Greece

HOME PAGE: http://www.aueb.gr/users/cgenakos

Center for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Center for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Tommaso M. Valletti

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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