Working Paper: CEPR ID: DP9189
Authors: Steffen Hoernig
Abstract: We show that the prediction of a strategic connectivity breakdown under a receiving-party-pays (RPP) system and discrimination between on- and off-net prices does not hold up once more than two networks are considered. Indeed, equilibria with finite call and receiving prices exist for a large and realistic range of call externality values. This allows regulation of termination rates to achieve the socially optimal retail pricing structure under RPP.
Keywords: connectivity breakdown; mobile network competition; receiving party pays; termination rates
JEL Codes: L13; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| number of networks (D85) | strategic connectivity breakdowns (D85) |
| number of networks (D85) | pricing strategies (D49) |
| number of networks (D85) | likelihood of strategic breakdowns (D74) |
| number of networks (D85) | stability of pricing structures (L11) |
| strategic pricing (D49) | connectivity breakdowns (L96) |
| number of networks (D85) | convergence of charges to on-net costs (L96) |