Calling circles: Network competition with non-uniform calling patterns
File(s)The RAND Journal of Economics_45_1_2014.pdf (232.1 KB)
Accepted version
Author(s)
Hoernig, S
Inderst, R
Valletti, T
Type
Journal Article
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.
Date Issued
2014-03-25
Date Acceptance
2014-03-01
Citation
RAND Journal of Economics, 2014, 45 (1), pp.155-175
ISSN
0741-6261
Publisher
Wiley
Start Page
155
End Page
175
Journal / Book Title
RAND Journal of Economics
Volume
45
Issue
1
Copyright Statement
© 2014, RAND. This is the peer reviewed version of the following article: Hoernig, S., Inderst, R. and Valletti, T. (2014), Calling circles: network competition with nonuniform calling patterns. The RAND Journal of Economics, 45: 155–175, which has been published in final form at http://dx.doi.org/10.1111/1756-2171.12046. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Publication Status
Published
Date Publish Online
2014-03-25