A retail benchmarking approach to efficient two-way access pricing

Doh-Shin Jeon and Sjaak Hurkens

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: for instance, we show that both static and dynamic e±ciency can be achieved at the same time.

Keywords: Networks; Access Pricing; Interconnection; Competition Policy; Telecommunications; Investment (search for similar items in EconPapers)
JEL-codes: D4 K21 L41 L51 L96 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-com, nep-law, nep-mic and nep-net
References: Add references at CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: A Retail Benchmarking Approach to Efficient Two-Way Access Pricing (2015)
Working Paper: A Retail Benchmarking Approach to Eficient Two-Way Access Pricing (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1055

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