A simple access pricing rule to achieve the Ramsey outcome for interconnected networks

Doh-Shin Jeon

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

Abstract: This paper considers a general and informationally efficient approach to determine the optimal access pricing rule for interconnected networks. It shows that there exists a simple rule that achieves the Ramsey outcome as the unique equilibrium when networks compete in linear prices without network-based price discrimination. The approach is informationally efficient in the sense that the regulator is required to know only the marginal cost structure, i.e. the marginal cost of making and terminating a call. The approach is general in that access prices can depend not only on the marginal costs but also on the retail prices, which can be observed by consumers and therefore by the regulator as well. In particular, I consider the set of linear access pricing rules which includes any fixed access price, the Efficient Component Pricing Rule (ECPR) and the Modified ECPR as special cases. I show that in this set, there is a unique rule that implements the Ramsey outcome as the unique equilibrium independently of the underlying demand conditions.

Keywords: Networks; Access Pricing; Interconnection; Competition Policy (search for similar items in EconPapers)
JEL-codes: D4 K21 L41 L51 L96 (search for similar items in EconPapers)
Date: 2005-02, Revised 2005-09
New Economics Papers: this item is included in nep-com, nep-law and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:808

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