This paper analyzes the impact of two-way access charges on the incentives to invest in networks with different levels of quality. When quality has an impact on all calls initiated by customers (destined both on-net and off-net), we obtain a result of “tacit collusion” even in a symmetric model with two-part pricing. Firms tend to under-invest in quality, and this is exacerbated if they can negotiate reciprocal termination charges above cost. When the quality of off-net calls depends on the interaction between the quality of the two networks, no network has an incentive to jump ahead of its rival by investing more.

Investments and Network Competition / Cambini, Carlo; Valletti, T.. - In: RAND JOURNAL OF ECONOMICS. - ISSN 0741-6261. - 36(2):(2005), pp. 446-467.

Investments and Network Competition

CAMBINI, CARLO;
2005

Abstract

This paper analyzes the impact of two-way access charges on the incentives to invest in networks with different levels of quality. When quality has an impact on all calls initiated by customers (destined both on-net and off-net), we obtain a result of “tacit collusion” even in a symmetric model with two-part pricing. Firms tend to under-invest in quality, and this is exacerbated if they can negotiate reciprocal termination charges above cost. When the quality of off-net calls depends on the interaction between the quality of the two networks, no network has an incentive to jump ahead of its rival by investing more.
2005
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11583/1398252
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