General Access Payment Mechanisms

Izak Atiyas (), Toker Doganoglu and Martin Reichhuber
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Izak Atiyas: Sabanci University
Toker Doganoglu: Sabanci University
Martin Reichhuber: Sabanci University

A chapter in Telecommunication Markets, 2009, pp 17-39 from Springer

Abstract: Abstract Despite the voluminous literature documenting their problems, per unit access pricing mechanisms are the most common ones used in practice. Interestingly, neither legal documents nor theoretical work on access payments provide any justifications for restricting access payments to per-unit charges. In this paper, we examine the properties of general one-way access payment mechanisms where payments from the entrants to the incumbent are expressed as functions of retail prices. We find that by imposing a linear access pricing mechanism the regulator can implement any pair of retail prices, including the first best. We also show that a per-unit access mechanism, including one which is cost-based, is incapable of implementing the first-best outcome. Moreover, we obtain a partial welfare ordering of payment mechanisms in that any linear access payment mechanism that depends negatively on the incumbent’s price and positively on the entrant’s price generates desirable outcomes with higher consumer welfare than payment mechanisms where parameters have the opposite signs.

Keywords: Retail Price; Allocative Efficiency; Retail Prex; Access Price; Access Charge (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-7908-2082-9_2

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DOI: 10.1007/978-3-7908-2082-9_2

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