Information Exchange and Competition in Communications Networks

Tommaso Valletti and Carlo Cambini

No 5031, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete for such users by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off-net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also show that a ?bill-and-keep? system over access charges can approximate an efficient regime and we discuss when this system emerges from private negotiations.

Keywords: Interconnection; Access charges; Reception charges; Bill-and-keep; Information exchange (search for similar items in EconPapers)
JEL-codes: L41 L96 (search for similar items in EconPapers)
Date: 2005-05
New Economics Papers: this item is included in nep-net
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: INFORMATION EXCHANGE AND COMPETITION IN COMMUNICATIONS NETWORKS* (2008)
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