Investments and Network Competition

Tommaso Valletti and Carlo Cambini ()
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Carlo Cambini: Politecnico di Torino

RAND Journal of Economics, 2005, vol. 36, issue 2, 446-468

Abstract: We analyze the impact of two-way access charges on the incentives to invest in networks with different levels of quality. When quality has an impact on all calls initiated by customers (destined both on-net and off-net), we obtain a result of ``tacit collusion" even in a symmetric model with two-part pricing. Firms tend to underinvest in quality, and this is exacerbated if they can negotiate reciprocal termination charges above cost. When the quality of off-net calls depends on the interaction between the quality of the two networks, no network has an incentive to jump ahead of its rival by investing more.

Keywords: Monopolization; Horizontal Anticompetitive Practices Telecommunications interconnection; investment quality; telecommunication; two-way access charges (search for similar items in EconPapers)
JEL-codes: L41 L96 (search for similar items in EconPapers)
Date: 2005
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