Network Competition and Entry Deterrence

Tommaso Valletti and Joan Calzada

No 5381, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a model of logit demand that extends to a multi-firm industry the traditional duopoly framework of network competition with access charges. Firstly, we show that, when incumbents do not face the threat of entry and compete in prices, they inefficiently establish the reciprocal access charge below cost. This inefficiency disappears if incumbents compete in utilities instead of prices. Secondly, we study how incumbents change their choices under the threat of entry when they determine an industry-wide (non-discriminatory) access charge. We show how incumbents may accommodate all possible entrants, only a group of them, or may completely deter entry. When entry deterrence is the preferred option, incumbents distort upwards the access charges.

Keywords: Telecommunications; Interconnection; Entry deterrence (search for similar items in EconPapers)
JEL-codes: L41 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://cepr.org/publications/DP5381 (application/pdf)

Related works:
Journal Article: Network Competition and Entry Deterrence (2008)
Journal Article: Network Competition and Entry Deterrence (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5381

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5381

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().