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The Breakdown of Connectivity Breakdowns

Steffen Hoernig

No 9189, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that the prediction of a strategic connectivity breakdown under a receiving-party-pays (RPP) system and discrimination between on- and off-net prices does not hold up once more than two networks are considered. Indeed, equilibria with finite call and receiving prices exist for a large and realistic range of call externality values. This allows regulation of termination rates to achieve the socially optimal retail pricing structure under RPP.

Keywords: Connectivity breakdown; Mobile network competition; Receiving party pays; Termination rates (search for similar items in EconPapers)
JEL-codes: L13 L51 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-com, nep-net and nep-reg
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