Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81509
Authors: 
Tangerås, Thomas
Year of Publication: 
2012
Series/Report no.: 
IFN Working Paper 903
Abstract: 
I generalize the workhorse model of network competition to include income effects in call demand. Empirical work has shown call demand to increase significantly with income. For any positive income effect, network operators prefer a termination rate above marginal cost if networks are sufficiently differentiated. This holds with or without call price discrimination. Under price discrimination, the networks charge a lower price for calls within the own network (on-net) than to other networks (off-net). Income effects thus deliver theoretical results consistent with stylized facts about call prices and in line with regulatory concern about excessive termination rates.
Subjects: 
Income effects
Network competition
Termination-based price discrimination
Two-part tariffs
Profit neutrality
Termination rates
JEL: 
L51
L96
Document Type: 
Working Paper

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