On the receiver pays principle

Doh-Shin Jeon, Jean-Jacques Laffont and Jean Tirole

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

Abstract: This paper extends the theory of network competition between telecommunications operators by allowing receivers to derive a surplus from receiving calls (call externality) and to affect the volume of communications by hanging up (receiver sovereignty). We investigate the extent to which receiver charges can lead to an internalization of the calling externality. When the receiver charge and the termination (access) charge are both regulated, there exists an e±cient equilibrium. Effciency requires a termination discount. When reception charges are market determined, it is optimal for each operator to set the prices for emission and reception at their off-net costs. For an appropriately chosen termination charge, the symmetric equilibrium is again effcient. Lastly, we show that network-based price discrimination creates strong incentives for connectivity breakdowns, even between equal networks.

Keywords: Networks; interconnection; competition policy (search for similar items in EconPapers)
JEL-codes: D4 K21 L41 L51 L96 (search for similar items in EconPapers)
Date: 2001-03
New Economics Papers: this item is included in nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Journal Article: On the Receiver-Pays Principle (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:561

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