Price Differentiation Between On-net And Off-net Calls: An Application To The Chilean Telephony Market

Claudio Agostini, Eduardo Saavedra and Manuel Willington

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

Abstract: This paper characterizes discriminatory plans offered by Movistar in Chile in May 2010, before the Competition Court of Chile banned the offer of plans based on different prices for on-net and off-net calls. Using a model of strategic interaction among firms that set discriminatory and nonlinear prices, this paper assess the extent to which on-net and offnet price differentials in this plans represent predatory practices in the mobile telephony market in Chile. The main result is that for high levels of call externality, most Movistar’s offered plans should be explained by efficiency and strategic reasons. However, for low levels of call externality at least half plans for individual customers could present evidence of anticompetitive practices. Therefore, whether our result justifies or contradicts the Competition Court’s decision is a matter of future empiric work, since information regarding the call externality parameter is not fully reliable.

Keywords: Telecommunication Network Competition; On-net/off-net Price Discrimination; Call Externality; chile (search for similar items in EconPapers)
JEL-codes: D43 L41 L51 L96 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-03
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Citations: View citations in EconPapers (2)

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Working Paper: Price Differentiation between On-Net and Off-Net Calls: An Application to the Chilean Telephony Market (2016)
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