Why is on-net traffic cheaper than off-net traffic? Access markup as a collusive device and a barrier to entry

Tommy Gabrielsen and Steinar Vagstad

No 03/04, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: Received literature have shown that if competing networks are restricted to linear and uniform pricing, high access charges can facilitate collusion; a result that breaks down if we allow for non-linear and discriminatory pricing, however. In this paper we add unbalanced calling pattern to the model and show that this may restore the use of high access charges. High access charges may make the firms collude on high prices. Moreover, when allowing for entry, we show that incumbents can profitably charge high access prices as a device to deter or soften entrants.

Keywords: Two-way access; non-linear pricing; competition; entry. (search for similar items in EconPapers)
JEL-codes: D43 L12 L13 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-06-23
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Why is on-net traffic cheaper than off-net traffic? Access markup as a collusive device and a barrier to entry (2004)
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