Network Competition: Ii. Price Discrimination

RAND Journal of Economics, Vol. 29, No. 1, Winter 1997

Posted: 11 Feb 1998

See all articles by Jean-Jacques Laffont

Jean-Jacques Laffont

University of Southern California - Department of Economics (Deceased)

Patrick Rey

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI); University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); Centre for Economic Policy Research (CEPR)

Abstract

Our companion article developed a clear conceptual framework of negotiated or regulated interconnection agreements between rival operators and studied competition between interconnected networks, under the assumption of non-discriminatory pricing. This article relaxes this assumption and allows networks to charge different prices for calls terminating on the subscriber's network and those terminating on a rival's network. This creates a price differential between services that are identical for the consumer and generates network externalities despite network interconnection. We show that in both the mature and entry phases of the industry, the nature of competition is substantially affected by such price discrimination.

JEL Classification: D41, L11, K21, L41, L43, L51

Suggested Citation

Laffont, Jean-Jacques and Rey, Patrick and Tirole, Jean, Network Competition: Ii. Price Discrimination. RAND Journal of Economics, Vol. 29, No. 1, Winter 1997. Available at SSRN: https://ssrn.com/abstract=47961

Jean-Jacques Laffont (Contact Author)

University of Southern California - Department of Economics (Deceased)

No Address Available

Patrick Rey

Toulouse School of Economics ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Place Anatole France
21 Allees de Brienne
F-31042 Toulouse Cedex
France
+33 5 61 12 8642 (Phone)
+33 5 61 12 8637 (Fax)

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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