The ambivalence of two-part tariffs for bottleneck access

Steffen Hoernig and Ingo Vogelsang

Nova SBE Working Paper Series from Universidade Nova de Lisboa, Nova School of Business and Economics

Abstract: Two-part tariffs, when used at the retail level, increase efficiency by lowering the price of marginal units. The same potential for higher efficiency exists for two-part tariffs at wholesale level for a given market structure, but the fixed part of the wholesale tariff can negatively affect the latter. In a simulated competition model of next-generation telecommunications access networks that has been calibrated with engineering cost data, we show that the latter effects strongly outweigh the former. That is, substituting a cost-based linear wholesale access tariff with revenue-equivalent two-part tariffs reduces the number of access seekers and therefore leads to higher prices and lower welfare and consumer surplus.

Pages: 17 pages
Date: 2012
New Economics Papers: this item is included in nep-com and nep-reg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:unl:unlfep:wp568

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