Tariff-mediated network effects versus strategic discounting: Evidence from German mobile telecommunications

Leon Zucchini, Jörg Claussen and Moritz Trüg

International Journal of Industrial Organization, 2013, vol. 31, issue 6, 751-759

Abstract: Mobile telecommunication operators routinely charge subscribers lower prices for calls on their own network than for calls to other networks (on-net discounts). Studies on tariff-mediated network effects suggest this is due to large operators using on-net discounts to damage smaller rivals. Alternatively, research on strategic discounting suggests that small operators use on-net discounts to advertise with low on-net prices. We test the relative strength of these effects using data on tariff setting in German mobile telecommunications between 2001 and 2009. We find that large operators are more likely to offer tariffs with on-net discounts but there is no consistently significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause of on-net discounts.

Keywords: Competition; Network effects; Mobile telecommunications; Pricing strategies (search for similar items in EconPapers)
JEL-codes: D22 L11 L96 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Tariff-Mediated Network Effects versus Strategic Discounting: Evidence from German Mobile Telecommunications (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:31:y:2013:i:6:p:751-759

DOI: 10.1016/j.ijindorg.2013.04.002

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