Calling circles

network competition with nonuniform calling patterns

Steffen Hoernig, Roman Inderst, Tommaso Valletti

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

We introduce a flexible model of telecommunications network competition with nonuniform calling patterns, accounting for the fact that customers tend to make most calls to a small set of similar people. Equilibrium call prices are distorted away from marginal cost, and competitive intensity is affected by the concentration of calling patterns. Contrary to previous predictions, jointly profit-maximizing access charges are set above termination cost in order to dampen competition if calling patterns are sufficiently concentrated. We discuss implications for regulating access charges as well as on- and off-net price discrimination.

Original languageEnglish
Pages (from-to)155-175
Number of pages21
JournalRand Journal Of Economics
Volume45
Issue number1
DOIs
Publication statusPublished - Mar 2014

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