Information Exchange and Competition in Communications Networks

45 Pages Posted: 12 Sep 2005

See all articles by Carlo Cambini

Carlo Cambini

Politecnico di Torino & EUI - Florence School of Regulation; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Tommaso M. Valletti

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

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

We develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete for such users by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off-net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also show that a 'bill-and-keep' system over access charges can approximate an efficient regime and we discuss when this system emerges from private negotiations.

Keywords: Interconnection, access charges, reception charges, bill-and-keep, information exchange

JEL Classification: L41, L96

Suggested Citation

Cambini, Carlo and Valletti, Tommaso M., Information Exchange and Competition in Communications Networks (May 2005). CEPR Discussion Paper No. 5031. Available at SSRN: https://ssrn.com/abstract=774124

Carlo Cambini

Politecnico di Torino & EUI - Florence School of Regulation ( email )

Corso Duca degli Abruzzi, 24
Torino, Torino 10129
Italy
+390115647292 (Phone)
+390115647299 (Fax)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Tommaso M. Valletti (Contact Author)

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
20
Abstract Views
937
PlumX Metrics