Network competition with income effects

• 成果类型: Article
• 署名作者: Tangeras, Thomas P.
• 署名单位: Research Institute of Industrial Economics (IFN)
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12066
• 发表日期: 2014
• 页码: 645-673
• 关键词: access; bill

摘要

I generalize the workhorse model of network competition to include income effects in demand. Empirical work has shown income effects to be positive and statistically significant. Income effects deliver theoretical results consistent with regulatory concern about excessive termination rates: unregulated network operators competing in nondiscriminatory retail contracts negotiate termination rates above cost for any positive income effect. This also holds when operators discriminate between on-net and off-net calls if networks are differentiated. Operators profit from increasing termination rates above cost under second-degree price discrimination if a sufficient share of consumers prefer on-net/off-net contracts and their subscription demand is relatively inelastic.