Competition and mergers in networks with call externalities Concurrence et fusions entre réseaux avec externalités d’appels

Edmond Baranes () and Laurent Flochel ()
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Edmond Baranes: Université Montpellier 1

No 308, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: This paper considers a model of two interconnected networks with different qualities. There are call externalities in the sense that consumers value calls they send and receive. Networks compete in two part tariffs. We show that call externalities create private incentives for each competitor to charge low access prices. This result moderates the risk of tacit collusion when competitors can freely negotiate their access charges. We also analyze the case of a merger between the two networks and give conditions under which the merger can be welfare improving.

Keywords: call externalities; interconnection; mergers; telecommunications (search for similar items in EconPapers)
JEL-codes: D43 K21 L41 L96 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2003-08
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:0308

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