Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30127 
Year of Publication: 
2008
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 2008,27
Publisher: 
Philipps-University Marburg, Faculty of Business Administration and Economics, Marburg
Abstract: 
This paper looks at the effects of different forms of wholesale and retail regulation on retail competition in fixed network telephony markets. We explicitly model two asymmetries between the incumbent operator and the entrant: (i) While the incumbent has zero marginal costs, the entrant has the wholesale access charge as (positive) marginal costs; (ii) While the incumbent is setting a two-part tariff at the retail level (fixed fee and calls price), the entrant can only set a linear price for calls. Competition from other infrastructures such as mobile telephony or cable is modelled as an outside opportunity for consumers. We find that a horizontally differentiated entrant with market power may be subject to a margin squeeze due to double marginalization but will never be completely foreclosed. Entrants without market power might be subject to a margin squeeze if the wholesale access price is set at average costs and competitive pressure from other infrastructures increases. We argue that a wholesale price regulation at average costs is not optimal in such a situation and discuss retail minus and deregulation as potential alternatives.
Subjects: 
access regulation
foreclosure
margin squeeze
telecommunications
fixed networks
JEL: 
L12
L41
L42
L50
L96
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.