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Calling Circles: Network Competition with Non-Uniform Calling Patterns

Steffen Hoernig (), Roman Inderst and Tommaso Valletti ()

No 206, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We introduce a flexible model of telecommunications network competition with non-uniform calling patterns, which account for the fact that customers tend to make most calls to a small set of contacts. Equilibrium call prices are distorted away from marginal cost, and competitive intensity is affected by the concentration of calling patterns. Contrary to previous predictions, jointly profit-maximizing access charges are set above termination cost in order to dampen competition, and the resulting on-net prices are below off-net prices, if calling patterns are sufficiently concentrated. We discuss implications for regulating access charges as well as on- and off-net price discrimination.

Keywords: Network competition; non-uniform calling patterns; termination charge (search for similar items in EconPapers)
JEL-codes: L13 L51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-net
Date: 2011-07-04, Revised 2011-07-04
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Related works:
Journal Article: Calling circles: network competition with nonuniform calling patterns (2014) Downloads
Working Paper: Calling Circles: Network Competition with Non-Uniform Calling Patterns (2010) Downloads
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