The Revenue-Sharing Rule for Interconnection Charges

13 Pages Posted: 24 Sep 2004

See all articles by Jeong-Yoo Kim

Jeong-Yoo Kim

Kyung-Hee University - Department of Economics

Yoonsung Lim

Dongduk Women's University

Abstract

In this paper we explore the economic principle behind the revenue-sharing rule for interconnection charges. Our main finding is that symmetric firms can collude by splitting the revenues equally. We further characterize the optimal revenue-sharing ratio and discuss the relationship between optimal ratio and the optimal access price. We also show that the revenue-sharing rule can have the perverse effect of inducing a firm to raise its own costs in order to gain a higher share of revenues.

Suggested Citation

Kim, Jeong-Yoo and Lim, Yoonsung, The Revenue-Sharing Rule for Interconnection Charges. Japanese Economic Review, Vol. 55, No. 3, pp. 298-310, September 2004. Available at SSRN: https://ssrn.com/abstract=591433

Jeong-Yoo Kim (Contact Author)

Kyung-Hee University - Department of Economics ( email )

Seoul 130-701
Korea

Yoonsung Lim

Dongduk Women's University

No Address Available

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