Network Competition: II. Price Discrimination
Volume: Volume 29, No. 1
Issue: Spring 1998
Pages: pp. 38-56
Authors: Jean-Jacques Laffont, Patrick Rey, and Jean Tirole
Title: Network Competition: II. Price Discrimination
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 nondiscriminatory 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 rivals 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
Telecommunications (L960)
Production, Pricing, and Market Structure; Size and Size Distribution of Firms Concentration, Product Differentiation, Entry and Exit
(L110)
Industry Studies Electrical, Gas, Communication, and Information Services
(6352)
Market Structure: Industrial Organization and Corporate Strategy
(6110)