Competition in Networks with Call Externalities
GATE Working Paper No. 03.08
20 Pages Posted: 25 Jun 2004
Date Written: May 2004
This paper considers a model of two interconnected networks with different qualities. There are call externalities in the sense that consumers value calls they send and receive. Networks compete in two part tariffs. We show that call externalities create private incentives for each competitor to charge low access prices. This result moderates the risk of tacit collusion when competitors can freely negotiate their access charges.
Keywords: Telecommunications, call externalities, interconnection
JEL Classification: D43, L41, L96
Suggested Citation: Suggested Citation