Mobile termination, network externalities, and consumer expectations

Sjaak Hurkens and Angel Lopez ()
Additional contact information
Angel Lopez: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

No D/850, IESE Research Papers from IESE Business School

Abstract: We re-examine the literature on mobile termination in the presence of network externalities. Externalities arise when firms discriminate between on- and off-net calls or when subscription demand is elastic. This literature predicts that profit decreases and consumer surplus increases in termination charge in a neighborhood of termination cost. This creates a puzzle since in reality we see regulators worldwide pushing termination rates down while being opposed by network operators. We show that this puzzle is resolved when consumers¿ expectations are assumed passive but required to be fulfilled in equilibrium (as defined by Katz and Shapiro, AER 1985), instead of being rationally responsive to non-equilibrium prices, as assumed until now.

Keywords: Networks; Rational Expectations; Access Pricing; Interconnection; Regulation; Telecommunications (search for similar items in EconPapers)
JEL-codes: K23 L51 L96 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2010-03-03
New Economics Papers: this item is included in nep-law, nep-net and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.iese.edu/research/pdfs/DI-0850-E.pdf (application/pdf)

Related works:
Working Paper: Mobile Termination, Network Externalities, and Consumer Expectations (2015)
Journal Article: Mobile Termination, Network Externalities and Consumer Expectations (2014)
Working Paper: Mobile Termination, Network Externalities, and Consumer Expectations (2010)
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:ebg:iesewp:d-0850

Access Statistics for this paper

More papers in IESE Research Papers from IESE Business School IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN. Contact information at EDIRC.
Bibliographic data for series maintained by Noelia Romero ().